Bitcoin (BTC): Cleveland Fed Backs Lighting Network (LN)

Bitcoin (BTC): Cleveland Fed Backs Lighting Network (LN)

The US Federal Reserve would be lying to us if it said one day it didn’t care about bitcoin (BTC). The proof, she published a working document on the Lightning Network and the exchange possibilities it authorizes with bitcoin. To say that the famous report offers several advantages compared to other traditional payment methods such as Visa and MasterCard.

Lightning Network, turning bitcoin into fiat

The Cleveland Fed’s report on its study of ” The Lightning Network: Converting Bitcoin to Money it’s no surprise to enthusiasts. Admittedly, it was done over an earlier period, from 1er January 2017 to September 5, 2019, but she praised the LN for improving the effectiveness of bitcoin.

Here is the comment from this banking institution:

We find a significant association between LN adoption and reduced blockchain congestion, suggesting that LN helped improve bitcoin’s efficiency as a payment method. This improvement cannot be explained by other factors, such as changes in demand or adoption of SegWit. »

This detachment from the US Federal Reserve comprehensively described the characteristics of the Lightning Network in its report. He did not omit to give explanations on how the many transactions carried out on this platform are carried out. In general, the LN is based on a side chain that integrates two distinct steps:

  • opening the smart contract ;
  • and settle or close the balance.

The LN works in the same way as credit cards, except that bitcoin transactions are recorded on the blockchain. For CVs, it’s a completely different story.

Lightning Network and bitcoin (BTC), future prospects?

The Cleveland FED does not believe that the LN is a ” all pay for bitcoin. But a significant advantage is that this network saves energy.

Second, since fewer transactions need to be recorded on the blockchain, less memory and energy is needed to run a bitcoin node.…Third, by reducing 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. »

Anantha Divakaruni and Peter Zimmerman, researchers at Cleveland Bank, believe that the Lightning Network will help bitcoin development and better performance as a means of payment “.

At the moment, we cannot say that bitcoin will be able to compete with MasterCard and Visa. 7 transactions per second is a far cry from the 1,700 transactions 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, hand in hand, the Lightning Network and bitcoin are trying to set aside centralization and introduce a new alternative to traditional solutions into our lives. However, some people accuse the LN of being a decentralized senator, without denying its positive influence. The response from the Cleveland Fed is clear: network centrality does not have a clear effect on network efficiency. »

Sources: BTCTimes; bitcoinist; Exodus

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