The US Federal Reserve would lie to us if one day it said it doesn’t care about bitcoin (BTC). The proof, he published a working document on the Lightning Network and the possibilities of exchange it authorizes with bitcoin. To say that the famous report offers some advantages over other traditional means of payment such as Visa and MasterCard.
Lightning Network, turning bitcoin into fiat
The Cleveland FED report on its study on ” The Lightning Network: turning Bitcoin into cash not surprising fans. It is true that it was performed in an earlier period, from 1uh From January 2017 to September 5, 2019, but praised the LN for improving the efficiency of bitcoin.
Here is the comment from this banking institution:
” We find a significant association between the adoption of LN and the reduction of blockchain congestion, suggesting that LN has helped improve the efficiency of bitcoin as a means of payment. This improvement cannot be explained by other factors, such as changes in demand or the adoption of SegWit. “
This detachment from the US Federal Reserve extensively described the characteristics of the Lightning Network in its report. He did not fail to provide explanations on how the many transactions carried out on this platform are carried out. In general, LN is based on a side chain that integrates two distinct phases:
- the opening of smart contract ;
- and settlement or closing of the balance.
LN works the same way as credit cards, except that bitcoin transactions are recorded on the blockchain. For CB, it’s a whole other story.
Lightning Network and bitcoin (BTC), prospects for the future?
The Cleveland FED does not believe LN is a ” panacea for bitcoin. But the fact that this network saves energy is a major advantage.
” Second, because fewer transactions need to be recorded on the blockchain, less memory and energy are required to run a bitcoin node.… Third, by reducing fees, 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 Lightning Network will help bitcoin 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 in the same period. Except that LN could increase this capacity and increase the figures up to 1,000,000 transactions per second.
In short, hand in hand, Lightning Network and bitcoin want to put centralization aside and bring a new alternative to traditional solutions to our world. However, some accuse LN of being a substitute for decentralization, without denying its positive effects. The Cleveland Fed’s response is clear: centralization of the network does not have a clear effect on the efficiency of the network. “
Sources: BTCTimes; bitcoinist; Exodus
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The blockchain and crypto revolution is underway! And the day the impacts are felt on the most vulnerable economy in this world, against all hope, I will say that it has something to do with it.