What Advantages Does Lightning Network Offer?

Global businesses are gradually making a shift towards a circular economy and the digitization of currencies for real-time settlements while buying or selling products. This shift is being majorly driven by developed and developing countries that are looking forward to switching to Fiat settlement through the lightning network to have quick and faster payments. Consequently, Lightning Payments are gaining more and more significance in today’s global business landscape. Firstly, what do you mean by lighting network? When Bitcoin was first introduced, you could request the blockchain network to send a transaction. Your payments were included in the block, and you paid a small fee to the miners while the transaction was added within just ten minutes and confirmed in an hour. That changed as Bitcoin gained a lot of prominence. With more transaction requests on the chain Ledger, the network could not meet that demand. The developers behind the lightning network claim it will be solved. As a second-layer payment protocol, it is designed to be layered on blockchain-based cryptocurrency technology. The lightning network creates open channels between the users for the small and the cheap payments before settling accounts on the blockchain. What are the advantages offered by the lightning network?

• Lowered costs of the transactions

The lightning network came with significant independence, financial freedom, and substantial cost savings. It is especially true for small businesses. At times 2 to 3% of the small business’s gross revenue is lost to credit card fees because of the supplier vendor and utility payments. If these companies start using the lightning network, they would dramatically reduce the cost of all the transactions, and there would be more autonomy regarding fees. Like, you are your own bank securing funds independently and doing the underwriting for all the transactions. It is the only reason why huge companies are still concerned about the network from the regulatory perspective.

• Real-time settlements

If you want to settle Bitcoin directly, it is straightforward. You can send it over the lightning network using the channels to reach the wallet or the merchant. But if you want to settle in Fiat, there is a solution to convert the Fiat into Bitcoin in real-time and send it to your merchant. Investors had to go through a transfer wire, and the money could potentially take days to land in the account. Typical financial institutions cannot make real-time settlements because of the standard approaches. But you quickly settle a Fiat transaction in real-time with a lightning network meaning instant liquidity. You can now convert Bitcoin to Fiat at any hour of the day on the fully functional cross-border platform. The funds are entirely fungible, and the movement is lodged on the Ledger, so there is proof that the money has been sent, and there are no follow-up delays or even closures on bank holidays.

• Lower energy consumption

You must admit that the narrative around bitcoins energy consumption has heard the movement, but the lightning network fixes the same. It scales the non-proportionally to energy usage and is specially designed to work on a peer-to-peer network leveraging the existing connections of people as the second layer. It supports off-chain transactions and does not use the computational power essential to confirm the blocks on the chain or even upload transactions. The lightning network is suspectable of future fraud as there is no clarity on the safety measures. If somebody just stole your account and used your funds over the network to pay for their goods and services, you will not even be able to get that back. You would have to protect the credentials, educate yourself about the system and take responsibility. This can be a hurdle initially, but you have to make some effort to deal with it. Settling Bitcoin payments is completely easy and fair. You can use the channels to send over the Bitcoin to the merchant, or it can be done through the lightning network. Converting Fiat to Bitcoin and sending it to the account could take several days before investors had to differentiate the transfer wire system. Today the system is super simple, all thanks to the lightning network. You can get the liquidity within a matter of minutes.