Whatever your opinions on Bitcoin, the fact remains that (in its current iteration) it’s not feasible as a mainstream everyday currency. It takes too long to process transactions, and the fees for each transaction are relatively enormous. Over an estimated 25 million people use Bitcoin today, which is much larger than it was meant to handle when it was first created.
Many of Bitcoin’s problems stem from the fact that it simply wasn’t designed to scale to this large of a user base. This is where the Lightning Network comes in.
The Lightning Network is not a replacement of Bitcoin’s infrastructure, but rather an overlay that works on top of Bitcoin.
One of Bitcoin’s core appeals — its security — is also its shortcoming. Every transaction made on Bitcoin is public. Recording all of this info publicly takes time, and each transaction costs an additional fee. The Lightning Network modifies this slightly, making a direct private connection between payer and payee, and only publicly recording the transaction’s result.
This method greatly reduces the amount of data publicly recorded, both speeding up transaction time and costing less in fees. As an added bonus, having a direct channel open between payer and payee encourages repeat business.
These factors mean that the Lightning Network could make Bitcoin a viable source of payment for small businesses.
Having been introduced earlier this year, the service has been growing by leaps and bounds. Currently an estimated 1.6 million dollars worth of Bitcoin is stored in Lightning-specific channels. Despite overall Bitcoin usage at a yearly low right now, usage for the Lightning Network is skyrocketing.
In September, Coingate announced that over 4,000 of its bitcoin-handling businesses will also be Lightning Network compatible. This is already a huge bump up from the 100 businesses announced as part of Coingate’s pilot program announced in July.
Whatever your opinions on Bitcoin (or cryptocurrencies as a whole), it’s difficult not to see the possibilities that the Lightning Network can offer. If you’re a small business owner even thinking about accepting Bitcoin for goods and services, the Lightning Network is going to make your decision a whole lot easier.