mon 25 Jul 2022 ▪ 13:00 ▪
min reading – per
The US Federal Reserve would be lying to us if one day they say they don’t need bitcoin (BTC). As proof, she published a working document on the Lightning Network and the exchange possibilities it allows with bitcoin. To say that the famous report grants some advantages over other traditional payment methods such as Visa and MasterCard.
Lightning Network, transforming bitcoin into fiat
The report from the Cleveland FED regarding its study on ” The Lightning Network: Turning Bitcoin into Money “there is nothing surprising for enthusiasts. True, it was carried out over an earlier period, from the 1er january 2017 to September 5, 2019, but she extolled the merits of the LN in improving the efficiency of bitcoin.
Here is the comment of this banking institution :
« We find a significant association between the adoption of the LN and the reduction of blockchain congestion, which suggests that the LN has helped to improve the efficiency of bitcoin as a means of payment. This improvement cannot be explained by other factors, such as the evolution of demand or the adoption of SegWit. »
This detachment of the US Federal Reserve has extensively described the characteristics of Lightning Network in its report. He did not fail to provide explanations on how the many transactions carried out on this platform are done. In general, the LN relies on a lateral chain integrating two very distinct stages :
- the opening of the smart contract ;
- and the settlement or closure of the balance.
The LN works in the same way as credit cards, except that bitcoin transactions are recorded on the blockchain. For the CB, it’s a whole different story.
Lightning Network and bitcoin (BTC), future prospects?
The Cleveland FED does not believe that the LN is a ” panacea “for bitcoin. But the fact that this network saves energy is a considerable advantage.
« Secondly, since fewer transactions have to be recorded on the blockchain, less memory and energy are required to operate a bitcoin node… Thirdly, by reducing fees, the LN reduces the incentive for Bitcoin miners to use large amounts of computing power, which means lower energy consumption and positive consequences for the environment. »
Anantha Divakaruni and Peter Zimmerman, researchers at the Bank of Cleveland, believe that the Lightning Network will help bitcoin ” to develop and function better as a means of payment ».
At the moment, we cannot afford to say that bitcoin will be able to compete with MasterCard and Visa. 7 transactions per second is a little far from the 1,700 transactions that Visa can process in the same period. Except that the LN could boost this capacity, and increase the numbers up to 1,000,000 transactions per second.
In short, hand in hand, the Lightning Network and bitcoin want to put aside centralization and bring into our world a new alternative to traditional solutions. However, some accuse the LN of being an ersatz decentralization, without denying its positive impacts. The Cleveland FED’s answer is clear: ” the centralization of the network does not have a clear effect on the efficiency of the network. »
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The blockchain and crypto revolution is underway! And the day when the impacts will be felt on the most vulnerable economy in this world, against all hope, I will say that I had something to do with it