Bitcoin is the world’s most secure and trusted cryptocurrency, but if you want to send it to someone, it’s going to cost you. During the best of times a Bitcoin transaction costs a dollar or two. However, during peak demand users are forced to pay dozens of dollars to use the network.
That’s where Elizabeth Stark comes in. Her Lightning Network protocol is a way to send Bitcoin instantaneously and for a transaction fee so small that it’s not even worth talking about. Thanks to her work in creating and developing Lightning, Elizabeth Stark is coming in at the number seven spot in the Exodus top 10 most influential people in crypto series.
A Promising Start
Elizabeth Stark has an impressive educational background. She was born in Brooklyn, took her undergraduates degree at Brown and completed her J.D. at Harvard Law school. Prior to getting involved with crypto, Elizabeth lectured at Yale and is a fellow at Coin Center.
Recognizing that Bitcoin needed to scale in order to meet its full potential, in 2016 Elizbeth co-founded Lightning Labs with Olaoluwa Osuntokun.
There are three schools of thought when it comes to scaling Bitcoin, and before we continue with Elizabeth’s story, we should summarize these solutions:
- Big blocks - A blockchain’s block size limits the number of transactions that the network can process. By raising the block size Bitcoin could process more transactions per second, making big blocks the scaling solution that’s the easiest to implement. The downside of big blocks is that they increase the size of the blockchain. A bigger blockchain is harder for nodes to sync, which means fewer people are likely to run a full node.
Small blocks are typically seen as a way to keep a blockchain as decentralized as possible, and the market has told us that this is the preferred option. Bitcoin Cash split from the Bitcoin main chain to adopt big blocks and has consistently lost market share since the fork.
- Layer two networks - Layer two networks, like Lightning, process transactions offchain. Because the execution environment is offchain, transactions are typically much faster and cheaper. Users who deposit their coins to a layer two network can withdraw back to the Bitcoin mainchain at any time.
- Scaling via alternative blockchains - Bitcoin can also scale via an external blockchain. As discussed in the Exodus blog article, Can Ethereum Scale Bitcoin?, it’s possible to lock Bitcoin in an Ethereum smart contract and then trade a tokenized version of that Bitcoin.
WBTC (Wrapped Bitcoin) is by far the most popular version of tokenized Bitcoin, however, decentralized competitors like Ren are growing in popularity.
The first public version of the Lightning Network went live in March of 2018, just several months after the blow-off top in Bitcoin. Although the network has had its ups and downs, Lightning has been live for more than three years and its adoption is quickly growing.
The Lightning Network in 2020
2020 was a great year for Elizabeth Stark’s company as the Lightning Network started to pick up some real momentum. According to Bitcoin Visuals, from January 1st of 2020 to December 31st, the Lightning Network increased its capacity from $6.1 million to $30 million.
Unlike the Bitcoin base layer, which has an unlimited capacity, the Lightning Network depends on user deposits. For example, if Alice wants to pay Bob 0.1 BTC using Lightning, Alice needs to deposit that amount into the Lightning Network and Bob needs to create an account (node) as well. Once both parties have created a Lightning node they can open a payment channel and transfer BTC between themselves.
But what if Alice wants to transfer money to Tony, who she hasn’t opened a payment channel with? Alice could open up a new channel with Tony, or, if there is an indirect connection she could route the funds through other channels. For example,
Alice ---> Matt ---> Steve ---> Tony
The one catch is that for a channel to work, each link needs to have an amount of BTC equal to the amount being sent. So if the payment is 0.1 BTC, Matt and Steve both need to already have 0.1 BTC in their Lightning accounts in order to pass along the payment.
Given how the network functions, Lightning channel capacities must keep rising. The higher the network’s capacity, the more people can interact without having to open new payment channels. Higher capacity also means that users can more easily send large transactions between themselves.
Besides growing the network throughout 2020, Lightning Labs raised $10 million in a series A round. Lightning Labs also released the beta version of Lightning Loop, a service that makes it easier for Lightning users to withdraw their BTC to the mainchain.
The Latest Developments at Lightning
The capacity of the Lightning Network has increased exponentially in 2021. At the beginning of the year Lightning had $30 million in capacity, but by August 15th that number had grown to more than $100 million. That’s a 230% growth rate in seven months. If it keeps up, the Lightning Network should have a quarter of a billion dollars worth of capacity by Q1 of 2022.
While all of that’s great for Elizabeth Stark and Lightning Labs, one of the most rewarding aspects of the Lightning Network must be seeing how it’s being used today. Jack Mallers, the CEO of the international payments company Strike, is leveraging the Lightning network to enable fast and inexpensive money transfers to South and Central America.
Lightning network payments are so much cheaper than bank and Western Union payments that it’s almost pointless to make a comparison. Nayib Bukele, the president of El Salvadore, has embraced the technology and other Latin American countries are looking to get on board with it soon as well.
The Lightning Round
The Lightning Network has had its ups and downs, but as of 2021 it looks like Lightning is showing the world just how it can be a force for good. Tens of millions of people spend billions of dollars every year just to send money back home, and the Lightning Network has the potential to disrupt this entire industry.
Anyone can use Lightning to send instant, nearly free Bitcoin payments to anywhere in the world. No KYC, no forms to fill out, no big banks out there taking a cut. The Lightning network is shaping up to be Bitcoin’s premier scaling solution and its success gives Elizabeth Stark a well-earned spot in our top 10 most influential people in crypto series.
BTC holders can securely store their Bitcoin in the Exodus Bitcoin Wallet, which allows users to remove their private keys for self-custody.
Top 10 Most Influential People in Crypto, the countdown:
10 - Vinny Lingham
9 - Kathleen Breitman
8 - Gavin Wood
7 - Elizabeth Stark
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.