It’s taken a few years but the Bitcoin Lightning Network (LN) is finally starting to catch on in a big way. The number of people using the Lightning Network in 2021 has grown significantly and 2022 is looking like it will be another big year for growth.
Now that the network is starting to catch on we’re thrilled to announce that Exodus is integrating Lightning into our wallet which will make super fast Bitcoin transactions easy for anyone to use!
But what is the lightning network, and why is the Exodus integration good news for Bitcoin? Read on to find out.
What is the Lightning Network?
The Lightning Network, developed by software developers at Lightning Labs, is a protocol that allows BTC users to send Bitcoin instantaneously and for a fraction of a cent.
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. Here is an excellent visualizer that illustrates how nodes are connected via payment channels.
Lightning Network: Growing into 2022
2021 has been the year of the Lightning Network! Even though it was first released in 2018, Lightning took a few years to catch on. Getting users to open their own payment channel was a tough sell, but thanks to integration with easy-to-use applications like Wallet of Satoshi and Exodus, the Lightning Network looks ready to take off. Currently there are over 83,000 open payment channels on Lightning, up from 37,000 channels at the start of 2021.
One of the most exciting developments for the Lightning Network has been its adoption by the Bitcoin payments company Strike. Strike uses LN to send fiat denominated payments all over the world. In other words, Strike users can send dollars or Euros over Lightning without having to convert their money into BTC first.
Strike has been so successful that El Salvador, arguably the most Bitcoin-friendly country in the world, decided to work closely with the company to integrate the Lightning Network. Bitcoin users in El Salvador can access the Lightning Network via Chivo, El Salvador’s official Bitcoin wallet.
Twitter has also gone all-in on the Lightning Network. Before Jack Dorsey left the company he brought Bitcoin tips to Twitter so that users can send micro BTC payments to each other. All of those Twitter BTC tips run on the Lightning Network, which is a great way to send small payments without paying a large transaction fee.
Next year looks particularly bullish for Lightning and Bitcoin, because a number of ecosystems that require micropayments are flourishing. Micropayments allow you to send small amounts of Bitcoin from your wallet without being priced out by the transaction fee. This is particularly useful for live streaming on platforms like Theta, where users will be able to stream by the second, and for blockchain gaming and play-to-earn economies, where players can be instantly rewarded.
Exodus adds The Lightning Network!
As of December anyone with the Exodus mobile app can access the Lightning Network directly through their wallet. Currently this feature is only available through the mobile app, but we hope to expand functionality to the desktop wallet in the future.
The Lightning Network connection is based on an integration with the Wallet of Satoshi, a popular Bitcoin wallet that works exclusively on LN. Normally someone would need to download Wallet of Satoshi separately to use Lightning, however, our integration will allow Exodus users to access Lightning directly without having to create a new wallet.
The following are a couple of features that we’re most proud of:
- Depositing and withdrawing funds to the Lightning Network is dead simple, anyone can do it with just a few clicks. Funds are withdrawn and deposited directly from the Exodus wallet. Since deposits and withdrawals are recorded on-chain they can take up to an hour
- Sending payments is easy since the Lightning wallet uses a QR code scanner to read addresses
- The 0.3% deposit and withdrawal fee are as low as possible, making this a great deal for our users
- Once Bitcoin is on the Lightning network transactions are instant and require only a tiny fee
Want to try it out? Learn how to use the Lightning Network inside Exodus with this step-by-step guide.
With Exodus, the time-consuming process of opening payment channels is all done behind the scenes. Going forwards into 2022. Exodus will help the Lightning Network become way more user-friendly, and onboard a raft of new users, and that can only be a good thing for Bitcoin.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.