The Europe-based exchange Bitstamp recently tweeted that it had established its own Bitcoin lightning node to facilitate transactions by enabling its users to benefit from zero-fee transactions and transferring small value transactions off the main chain.
What Are Lightning Nodes?
While it’s great news that one of the major crypto exchanges in the world has decided to support Bitcoin lightning nodes, some of you may be wondering what a lightning node is exactly.
Put shortly, it’s a node that creates a second blockchain layer below that of BTC and enables validation of transactions between users themselves. Once the channel established between two parties is closed, all transactions made are bundled up and sent into the main blockchain for validation and recording of the ledger. This, in turn, reduces bloat on the main chain and ensures only crucial information is stored. An added benefit of lightning networks is the fact that transactions completed there are instant and with low to no fees.
To clarify, lightning nodes aren’t specific to the blockchain of Bitcoin, they could be used in other networks as well, although sometimes under a different name. Take Ethereum for example, you have the same functionality, but they’re called Raiden nodes.
Exchanges Running Lightning Nodes
Thanks to the support of Bitstamp and its integration of lightning nodes into the platform, there’s hope for more wide-spread adoption among users in the industry. I’m happy to share that recently, Coinbase also announced it’s going to support lightning network transactions in partnership with Bitrefill and Bitfinex would also join in on the hype by backing Tether (USDT).
The wide-spread opinion is that in order for Bitcoin to become the future of payments, it’s going to need scalability, ease of use and fast transactions. That’s where lightning networks come in and combat those issues, hence the positive attitude towards major exchanges that adopt the tech. The hope is that Bitstamp’s move will trigger a snowball effect and ensure that BTC remains valuable and relevant in the long-term. Furthermore, having lightning networks backed by one of the largest crypto exchanges is no small feat.
To summarize, Bitstamp’s support and establishment of their own lightning node sets a precedent for others to follow in their steps, thus benefiting the whole Bitcoin network and the crypto industry as a whole. Whether or not this will lead to increased and sped-up adoption rates remains to be seen, but hopefully, it will.