Skip to content

The Lightning Network: Bitcoin’s Evolution to Medium of Exchange – Kraken Blog

The Lightning Network: Bitcoin’s Evolution to Medium of Exchange – Kraken Blog

Any good money must satisfy three important conditions:

  1. Preserves and stores value over time
  2. Serves as a widely accepted unit of account in a given market
  3. Acts as a practical medium of exchange for transfers of any size

Bitcoin’s predictable, deflationary supply growth rate is further outpacing its usefulness as a store of value. As bitcoin is being adopted around the world, the use of bitcoin as a medium of exchange, from funding daily purchases to high-value auctions, is starting to gain traction.

However, the bitcoin protocol has transaction limitations that make it possible to maintain a secure, distributed ledger. If the transaction limit was set too high, for example, only those with privileged access to expensive mining resources could operate the node. The transactional barrier to on-chain transfers that secures Bitcoin’s Layer 1 (L1) monetary protocol also prevents its functionality as a practical medium of exchange, especially for low-value transactions.

The Lightning Network, a Layer 2 (L2) protocol secured by Bitcoin’s L1, pushes these limits, allowing BTC to be used for instant, cost-effective payments around the world.

In the latest report from Kraken Intelligence, The Lightning Network: Bitcoin’s Evolution to Medium of ExchangeThe team highlights the technical design of the Lightning Network while analyzing its current state and adoption to date.

Kraken now supports instant Lightning Network transactions; learn more Here,

Making bitcoin globally accessible

The Lightning Network is a protocol that enables quick, cost-effective bitcoin transactions without custodial risk or blockchain centralization trade-offs. The same design choices that make BTC the most secure and decentralized currency in the world limit bitcoin transaction throughput to around seven transactions per second (TPS). Ledger updates are limited to once every 10 minutes on average. The Lightning Network predictably increases throughput 25 million TPS offering instant transaction settlement – ​​again, without compromising the security or decentralization of the bitcoin protocol.

A practical medium of exchange for all

Satoshi Nakamoto launched bitcoin in 2009 with the L2 payment channel concept. However, this initial attempt to address bitcoin’s scaling challenges was not secure, as miners soon realized they could be cheated by broadcasting older versions of the channel. This meant that one party could conspire with a miner to confirm a non-final version of the transaction. By doing so, they can claim more BTC than the channel balance, which should allow them to steal funds from other counterparties.

Learning from exploiting this shortcoming, innovative developers improved the security and usability of payment channels on the bitcoin protocol. In the process, he created the Lightning Network.

Although it has been slow since its launch in 2018, the Lightning Network is now showing a significant increase in adoption which could establish BTC as an easy, fast and cheap medium of exchange for all.

Unbanked early adopters use BTC as money

The Lightning Network is already making BTC a viable medium of exchange and is solving existing problems, especially for scores of unbanked individuals in emerging markets such as El Salvador. As the first country to recognize BTC as legal tender, El Salvador has further legalized the use of BTC for any transaction, from buying a cup of coffee to paying taxes.

If this growing trend of adoption continues, the Lightning Network could provide an effective alternative for those facing economic hardship in developing countries. Specifically, bitcoin could serve as a viable alternative to older payment systems and open up new economic opportunities for everyone.

Want to learn more? Download Kraken Intelligence Report The Lightning Network: Bitcoin’s Evolution to Medium of Exchange To understand what the Lightning Network is, the state of its adoption and the future it enables.

These materials are for general information purposes only and are not intended to be investment advice or recommendation or to buy, sell or hold any digital asset or engage in any specific trading strategy. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of crypto asset markets can lead to a loss of money. Any return and/or any increase in the value of your crypto assets may be taxable and you should seek independent advice on your taxation status.

credit source

The Lightning Network: Bitcoin’s Evolution to Medium of Exchange – Kraken Blog

#Lightning #Network #Bitcoins #Evolution #Medium #Exchange #Kraken #Blog

if you want to read this article from the original credit source of the article then you can read from here

Shopping Store 70% Discount Offer

Leave a Reply

Your email address will not be published.