Can the Lightning Network save “bitcoin as a currency?”
Bitcoin was built as a peer-to-peer payment option; borderless, trustless and free from the government’s omnipotent reach. But it seems to have hit a wall.
More than that, the amount of cash passing through merchants and buyers alike is on the decline.
According to data from blockchain research firm Chainalysis, the volume of USD in bitcoin passing through merchant’s hands has fallen by a devastating 80 percent this year.
After last year’s tremendous price run-up, followed by a surge in shockingly high transaction fees, the de facto leader in the crypto-space slowly began losing its value as a… currency.
Though transaction fees eventually fell, and volatility subsided, even briefly becoming more stable than the Dow Jones, bitcoin’s acceptance as a real currency has continued to slip.
Well, to be frank, it’s been a tough year for the crypto space.
Many bitcoin users across the globe may have noticed a steady decline in retailers accepting bitcoin as a payment option. From Steam to Expedia, a number of previously pro-bitcoin corporations have left the space, citing volatility, fees or even safety of their funds.
It’s clear that bitcoin’s crash weighed on the psyche of previously-keen businesses, as well.
While several retail giants which may have gotten into the space early are still going strong, such as Overstock or Newegg, for small businesses, volatility could cripple profits in the short-term.
And though there has been a ton of huge news — from institutional buzz to new tech and a growing number of true believers — there’s also been an onslaught of negative press, regulatory growing pains, and downright scandalous behavior.
Instead of being celebrated as the brilliant revelation in finance that it once was, an avalanche of blockchain use-cases, schemey shitcoins, and a relentless wave of ‘false profits’ have sucked the credibility from the space, pulling out the rug from the already shakey tower the industry’s most vocal advocates worked so hard to build.
So what’s next?
As institutional cash begins to flow and billionaire bitcoin bums duke it out to boost the size of their… uh… block size?, there’s a lot to look forward to.
Most importantly, adoption.
Though we can speculate on how new institutional offerings, decentralized exchanges, or supportive regulations will impact the price of bitcoin, what it always has and always will boil down to is people actually using bitcoin.
And despite the decline in both price and actual use as a currency, there’s a few developments currently flying under the radar that are poised to speed up that bitcoin adoption process.
The most hyped of this new tech? The Lightning Network.
The Lightning Network boasts negligible fees, instant transactions, donates to charity, always treats its dogs well, and even feeds the hungry.
Or something like that.
Basically, this peer-to-peer off chain micropayment solution is going to solve all of bitcoin’s scalability issues. Or so the story goes.
Though its still in its infancy, the Lightning Network is attracting a lot of attention, with over 4,000 nodes and 11,400 open channels. And its adoption has accelerated significantly in the past months.
And it’s clear to see why.
According to developers, the Lightning Network will be able to process upwards of 50,000 transactions per second, doubling what Visa claims to handle.
But actually using the Lightning Network is more difficult than just sending or receiving a transaction, at least for the time being.
One major bottleneck is that most trusted wallets don’t support Lightning Network functionality, and even the very few that do require users to run a full bitcoin node.
In addition to the lack of wallet support, there is absolutely zero merchant facing systems currently supporting the technology.
Compounding these problems, there’s the fact that both individuals in a particular transaction will need to be using the protocol. If it wasn’t already hard enough to convince your local bar to accept bitcoin, now you’ve got to ask them to download another platform that they don’t understand. And to get fiat, they are adding yet another step to the process.
And frankly, for now, at least, all of that is ok. Again, Lightning Network is still in its infancy, and it’s got some help on the way.
To be perfectly honest, Lightning is still ahead of its time. It’s a visionary protocol that will eventually open a lot of doors for bitcoin to be used as a method of payment, but it’s not quite there yet.
In an ideal world, users would be able to accept, transfer, and convert their bitcoin under one easy to use platform, all within seconds and with low fees. That’s the goal, right?
As it turns out, we might not be so far away, but there are still hurdles to cross.
The Lightning Network successfully addresses one of bitcoin’s biggest concerns: Scalability. Now we need to address one of the Lightning Network’s biggest concerns: Usability.
For Bitcoin to truly live up to its potential, the truth is, it needs to be wrapped up in a pretty little easy-to-use box and sold to the public.
Picture from Wikimedia Commons.