Bitcoin is one of the greatest inventions when it comes to payments across borders. Its 2008 white paper by Satoshi Nakamoto described the original plan for Bitcoin and blockchain technology. With this technology, individuals could securely transfer assets without the help of an intermediary like a bank.

Although Bitcoin has been massively adopted by regular users and institutions, critics have noted that its transfer speeds are too slow. At the same time, its transaction fees have shot up drastically over the years, and this has affected the adoption of the coin.

One solution that is helping to bring down the transfer fees for Bitcoin is the Lightning Network, a layer 2 solution built on the Bitcoin blockchain. For the latest news about Bitcoin, and where to trade with BTC, visit Crypto Lists Ltd.

What is the Lightning Network?

In an interview with Crypto Lists, a crypto expert describes the Lightning Network as a layer 2 solution that helps to reduce transaction fees and speed up the network. He compares it to presenting a credit card at a bar, where the establishment would need to withdraw the funds when all transactions are complete. That means you won’t need to make micro-transactions for every order.

Similarly, with the Lightning Network, you will need to open a channel between yourself and the bartender, and the balances will move back and forth within this channel. Once you close the channel, the total will be recorded on the main Bitcoin blockchain. As the interviewee notes, this system is great for integrity and privacy as all transfers are encrypted on the Lightning Network. The nodes will not even know where the funds are coming from or where they are going. An independent review of the Lightning blockchain can be found here.

The layer 2 solution has been around for many years, but it was used as a test network for many years. It would be recommended for real Bitcoin transactions in 2017, when the risk of certain issues was believed to be eliminated. Initially, transactions were meant to be smaller than 0.17 BTC. This restriction would later be removed. The developers of the network also introduced multi-path payments, which means you can now make payments via several routes at the same time.

The number of people running nodes for the Lightning Network has been growing over the years, and the expert interviewed even launched his own node known as Hash Position. It is still relatively easy to add and test new features of the network since such actions don’t require the consent of all participating nodes. The official site for Bitcoin explains how to run a full node.

Use of the Lightning Network in El Salvador

El Salvador shocked the traditional financial community when it chose to adopt Bitcoin as legal tender in September 2021. As legal tender, Bitcoin can be used to pay taxes and must be accepted at stores. It is worth noting that El Salvador does not print its own fiat currency and instead uses the US dollar. When the country chose to adopt Bitcoin, it had to overcome certain challenges associated with Bitcoin. It launched its own Bitcoin wallet to reward citizens who started using Bitcoin and even built 200 Bitcoin ATMs around the country. Still, the government had to come up with a solution to the high transfer fees and poor transaction speeds as these issues can discourage people from using the coin.

This is where Lightning Network comes in. Lots of people in the country use this network for remittances, which make up about 24 per cent of the GDP of the country. This amounts to more than $6 billion every year. The Lightning Network does not charge any transaction fees, and this makes it a better solution than many traditional payment services. It is also worth noting that this solution does not have any barriers to entry.

Adoption of the Lightning Network in Argentina

The government of Argentina has strict control over foreign currency, and this system has made residents more willing to use Bitcoin to make transactions and investments. The cryptocurrency isn’t considered legal tender and can’t be used to pay for government services. However, it is still legal and is increasingly gaining popularity in the country.

Strike, a popular digital wallet built on the Lightning Network, seems to have noticed this trend as they launched in Argentina. The company aims at offering superior financial experience to a country that is plagued by many monetary issues, including high levels of inflation.The company is already working with businesses and individuals in the country. Since it launched, it has been able to quadruple its team. It is set to expand its operations to Brazil and Colombia, as well as other South American nations.

What are the benefits of using Bitcoin?

The Bitcoin white paper was published more than 13 years ago by Satoshi Nakamoto on the Cryptography Mailing List. It led to the creation of many technologies surrounding blockchain. Let’s look at some of the main reasons for using Bitcoin:

• It isn’t regulated by any government institution or financial institution, which means your assets cannot be frozen at any time. Also, no government cannot forcibly acquire your cryptocurrencies.
• The coin offers high levels of anonymity and transparency. Although it is possible to trace certain transactions to individuals, public tracking is extremely difficult as the users are identified by numerical codes. Users can also have multiple public keys.
• You don’t need to provide any personal information in order to use Bitcoin, and this offers high levels of privacy.
• Since the cryptocurrency is not controlled by borders, it is highly accessible and versatile.

The Lightning Network further makes Bitcoin more accessible as it eliminates the transfer fees. You can use it to purchase goods and services from any part of the world, and the transfers will be completed almost instantly. In contrast, transfers made using the main Bitcoin blockchain can be completed within a few seconds.

Things to remember when using Bitcoin and the Lightning Network

Although Bitcoin and the Lightning Network are extremely advantageous, there are a few things you should remember when using these technologies. First, you should note that Bitcoin transfers are irreversible and final. Therefore, it is important to ensure you copy the recipient's address correctly. When purchasing items from an online store or individual, it is better to use an escrow service as this will only release the funds when the service or product has been successfully delivered. 

You also need to keep your write down your wallet password and private key and store the document in a secure place. This is because losing access to your wallet will lead to the complete and irreversible loss of your cryptocurrencies. It is worth noting that cold storage wallets are a lot safer since they are not connected to the internet.Although the lack of government regulation is considered a major benefit of Bitcoin, it can also introduce some risks. For example, you will not be able to get legal protection when you transact with Bitcoin. It is also possible for the value of the coin to go down drastically as a few whale addresses can sell off their coins at the same time.

When using Bitcoin and the Lightning Network, you also need to remember that you cannot make offline payments. Many online traders prefer to use a crypto broker in order to get exposure to cryptocurrencies like Bitcoin.

Summary

The Lightning Network has been able to bring down the fees for Bitcoin transactions as it doesn’t have any transfer charges. It has also boosted the transfer speeds for Bitcoin significantly. Lightning Network is continually being improved and is set to make Bitcoin more usable for regular transactions.

The information provided in this article is being provided solely for promotional and informational purposes and should not be construed as investment, tax or legal advice.