Bitstamp is one of the oldest cryptocurrency exchanges, they have now announced one to run their own lightning network node. And the great thing is at the request of their customers.
“We believe that the lightning network has the potential to take bitcoin to an even higher level. We have set up our own lightning network node to grow the network and encourage other companies to come on board. ”
ELECTRIFIED: We believe the Lightning Network has the potential to unlock a whole new level of utility for Bitcoin. We’ve set up our own #LN node to help grow the network and encourage other companies to get on board. Learn more or connect to our node: https://t.co/PwvwYGWTNd⚡️ pic.twitter.com/YebaPBwnQp
– Bitstamp (@Bitstamp) July 8, 2019
According to their own website, Bitstamp currently has 187 active channels out of a total of 38,649 channels on the second layer of the bitcoin blockchain. At the moment there are 195 connected nodes of a possible total of 5,631. The capacity of the Bitstamp node is currently more than 9 bitcoin. That is about 1/100 of what goes on in the total lightning network.
Good for the development of bitcoin
Bitstamp says they are running the node to increase the use-case scenario for Bitcoin and increase the degree of acceptance of the cryptocurrency. It is a cliché but this type of initiative is good for the development of bitcoin.
This development can be inhibited by the limited scalability of bitcoin. About seven transactions per second can be processed on the bitcoin blockchain. For comparison: credit card companies can process 24,000 transactions per second. Is the popularity of bitcoin growing even further? Then the blockchain runs up to its limits.
This was most clearly visible on January 23, 2018. On blockchain.info we see that the average confirmation time of a transaction took 11,453 minutes. That is almost eight days converted.
What is the lightning network?
One of the solutions is the lightning network, an off-chain application. This means that transactions do not take place on the blockchain, but on a layer around it.
Conversely, “normal” bit-point transactions are called on-chain transactions. These transactions do take place on the bitcoin blockchain.
With the help of the lightning network it is possible to send bitcoin payments at lightning speed, with minimal fees. This network must make bitcoin faster and more scalable.
How does a transaction work?
To use the Lightning Network, send bitcoin to the lightning network. This is possible via a lightning wallet. This transaction is a normal transaction on the bitcoin blockchain.
Then you make a connection with a node on the lightning network. This connection is called a channel. You can send bitcoin to anyone within the lightning network via a payment channel. The transactions that you make on this network are not included on the blockchain.
The moment you close your channel and you want to exchange your lighting bitcoin for normal bitcoin, a transaction is only credited to the blockchain. It may just be that you have already done thousands of transactions.