Bitfinex first large crypto exchange with bitcoin Lightning Network

Cryptocurrency exchange Bitfinex has announced that they now have a fully Lightning Network node running and integrated on their platform. This allows customers to open payment channels, so there are virtually no transaction costs when you deposit or withdraw coins.

Bitfniex has the scoop, they are the first large crypto exchange that makes the Lightning Network an integral part of their services.

What is the Lightning Network?

The Lightning Network is a second layer around the bitcoin blockchain. LN has been developed as a solution for the bitcoin scalability problem, since only seven transactions can be done worldwide per second via the bitcoin blockchain. This payment solution actually bypasses the blockchain, block confirmations are no longer needed for transactions.

A transaction is only credited to the blockchain if you open or close a channel. A simple example: you open a channel with BTC Direct from 1 bitcoin. The channel has the size of 1 bitcoin, so you and BTC Direct can constantly send each other a maximum of 1 bitcoin. If you send half a bitcoin to BTC Direct through the channel and then close the channel, the blockchain will be written down that you and BTC Direct both have half a bitcoin. In theory, such a payment channel can remain open indefinitely.

Speed ​​and efficiency

This is much more efficient than the current situation at exchanges. Normally a deposit of bitcoin requires 1 to 6 confirmations (or confirmations). On average, it takes 10 minutes for a transaction to receive 1 confirmation, so it can take just an hour for your bitcoins to be on an exchange. In times of bustle, such as in 2017, a transaction can easily take hours or even a day. And you also have to pay transaction costs for each transaction, depending on how busy the network is, this can add up considerably.

Grand channel

Because payments via the Lightning Network are possible, customers can deposit and withdraw bitcoins directly. If more exchanges join LN, this can be beneficial for traders (and especially bots) trying to conduct arbitrage.

The success of LN at Bitfinex also depends on the stability of the channel, but especially on how large the channel is. Most channels have a low capacity, but Bitfinex has a 3.5 bitcoins channel for deposits and 1.5 bitcoins for withdrawals.

This is an important step for the worldwide acceptance of the Lightning Network but also for bitcoin. Do you want to play with LN on Bitfinex? Then read this detailed explanation of the exhibition.