The US Federal Reserve would be lying to us if one day it said it didn’t care about bitcoin (BTC). The proof, she published a working document on the Lightning Network and the possibilities of change that it authorizes with bitcoin. To say that the famous report gives some advantages compared to other traditional means of payment like Visa and MasterCard.
Lightning Network, turning bitcoin into fiat
The Cleveland FED’s report regarding its study on ” The Lightning Network: Turning Bitcoin into Money comes as no surprise to enthusiasts. Admittedly, it was carried out over an earlier period, from 1uh January 2017 to September 5, 2019, but she praised the LN for improving the efficiency of bitcoin.
Here is the comment from this banking institution:
” We found a significant association between LN adoption and reduced blockchain congestion, suggesting that LN saved money from improving the efficiency of bitcoin as a means of payment. This improvement cannot be explained by other factors, such as changes in demand or adoption of SegWit. »
This secondment from the US Federal Reserve extensively describes the characteristics of Lightning Network in its report. He did not omit to provide explanations on how the many transactions carried out on this platform are made. In general, the LN relies on a side chain integrating two distinct steps:
- the opening of smart contract ;
- and the settlement or closing of the balance.
The LN works the same way as credit cards, except bitcoin transactions are recorded on the blockchain. For CBs, it’s a whole different story.
Lightning Network and bitcoin (BTC), prospects for the future?
The Cleveland FED does not believe the LN is a ” panacea for bitcoin. But the fact that this network saves energy is a considerable advantage.
” As fewer transactions need to be recorded on the blockchain, less memory and energy is needed to run a bitcoin node…Third, by using fees, the LN reduces the incentive for Bitcoin miners to use large amounts of computing power, which means less energy consumption and positive consequences for the environment. »
Cleveland Bank Researchers Anantha Divakaruni and Peter Zimmerman Believe the Lightning Network Helps Bitcoin to develop and function better as a means of payment “.
For the moment, we cannot afford to say that bitcoin will be able to compete with MasterCard and Visa. 7 transactions per second is a bit far from the 1,700 transactions that Visa can process over the same period. Except that the LN could boost this capacity, and increase the figures up to 1,000,000 transactions per second.
In short, in the hand, the Lightning Network and bitcoin want to put centralization aside and bring a new alternative to traditional solutions into our world. However, some accuse the LN of being an ersatz of decentralization, without denying its positive impacts. The response from the Cleveland FED is clear: network centralization does not have a clear effect on network efficiency. »
Sources: BTCTimes; bitcoinist; Exodus
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The blockchain and crypto revolution is underway! And the day when the impacts occurred on the most vulnerable economy of this World, against all hope, I will say that I had something to do with it