Joseph Poon and Thaddeus Dryja first proposed Bitcoin Lightning Network for fast bitcoin transactions in 2016, and the layer-2 network went live in 2018. Binance is now integrating the Lightning Network into its operation, boosting the speed of transactions on the exchange a half-decade after the Lightning Network’s launch.
Binance confirmed the integration on July 17.
Understanding the Lightning Network
The Lightning Network is a layer-2 protocol for Bitcoin, facilitating high-speed, low-cost transactions. The network facilitates off-chain transactions, so transactions can occur directly between parties without continuous reference to the primary blockchain.
The Lightning Network is designed to address Bitcoin’s scalability issues. It’s no secret that Bitcoin, the original decentralized payment system, wasn’t designed to handle the vast transaction volumes it encounters today. Consequently, Bitcoin users have experienced slow confirmations. The Lightning Network directly tackles these issues.
In addition, the Lightning Network leverages smart contracts and multi-signatures to ensure that receivers get the amounts to which they are entitled. Nonetheless, it is critical to recognize that this technology involves inherent hazards.
These risks range from potential fraudulent channel closures to transaction fees, vulnerability to hacks, and the threat of malicious attacks causing network congestion.
The Lightning Network and memecoins
Besides Binance, Coinbase, the United States’ largest crypto exchange, also embraces the Lightning Network.
Some eagle-eyed users spotted our new lightning nodes recently. Yes – that's us!
However, there's still more tech work to be done. We'll update once Lightning is fully integrated. https://t.co/N0oN8561sN
— Binance (@binance) June 20, 2023
March introduced the BRC-20 token standard thanks to an anonymous on-chain analyst named Domo. These tokens operate on the Bitcoin blockchain without smart contracts and depend on Bitcoin wallets for issuance and transfer.
Updated the gitbook to address common questions and my intentions for the experiment going forward.https://t.co/h6fksQ1oAe
— domo (@domodata) March 10, 2023
Memecoins like PEPE and Memetic have taken the lead among over 8,500 BRC-20 tokens created so far. With the market cap touching $120 million, these tokens witnessed a staggering 600% surge in a week. The increase in transaction volume increased transaction fees, contributing an extra 109.7 BTC to miners’ revenue.
The increase in fees can as least partly explain why Binance is finally integrating the Lightning Network, echoing the steps of other prominent exchanges such as Bitfinex, River Financial, OKX, Kraken, and CoinCorner.
Binance integrates the Lightning Network
Binance announced the successful integration of the Bitcoin Lightning Network for BTC deposits and withdrawals on July 17. Users can now choose “LIGHTNING” during Bitcoin transactions, ushering in faster and more affordable transactions.
More details here 👇https://t.co/aIofPdtAGY
— Binance (@binance) July 17, 2023
As the Bitcoin blockchain battles scalability and cost, the Lightning Network emerges as a feasible answer. However, the road ahead is filled with difficulties, and stakeholders must stay watchful and responsive to the network’s changing dynamics.
Despite recent legal issues with the Securities and Exchange Commission (SEC), Binance continues to operate. After uncertainty, relief came when Judge Amy Berman Jackson approved a consent agreement between Binance, Binance.US, and the SEC. This agreement effectively dismissed a temporary restraining order by the SEC that could have frozen all Binance.US assets.
The wider acceptance of the Lightning Network into Binance could help to shape the future of digital transactions, making them faster, cheaper, and more scalable.