When we think of bitcoin as a currency, the three essential functions taught in economics textbooks around the world come to mind. The unit of account, the store of value and the medium of exchange. It can be argued that bitcoin is often as thought of as the store of value, a digital conduit to a broader digital economy. Bitcoin
Yet, bitcoin’s steps towards being a medium of exchange and a unit of account for others is something that still hasn’t been fully fleshed out. There’s not many stores (yet) that take Lightning Network and bitcoin, yet the number continually expands and is being tracked in places like BTCMap.
In the past, bitcoin wasn’t used enough for there to be high transaction fees but that is no longer the case. Using on-chain transactions isn’t the way to go if you want to send and receive payments out — it takes about 30 minutes to process an on-chain transaction as of 2022, and there are (relatively) high transaction fees.
It’s Lightning Network at scale that allows for bitcoin to fulfill its promise as a medium of exchange. Recent developments on this infrastructure allows for private, near-instant payments between different people around the world.
You can set up your own shop and payment processing stack no matter where you are in the world and receive payments from Lightning wallets at a click of the button. In many ways, Lightning represents the fulfillment of bitcoin’s promise as a currency that can be used day-to-day for purchases as mundane as buying a cup of coffee — anywhere in the world.
Recent developments in the Lightning Network are promising
Recent developments have helped push this forward. Taro allows for the transfer of different assets across Lightning. This allows for people to use the Lightning Network, for example, to transfer stablecoins between each other, benefiting from bitcoin’s security and constant uptime, while using Lightning’s low fee structure.
There are multiple Lightning wallets that allow for different options when it comes to the transfer of value, from custodial to non-custodial versions. This came after the Taproot upgrade to the bitcoin protocol, showing how innovation in the underlying protocol feeds “Layer 2” solutions that can help bring financial accessibility to bitcoin and in turn bring this network innovation to people around the world.
A sophisticated ecosystem of Lightning nodes allows consumers to choose between multiple options that help people switch between on-chain and off-chain transactions at their whim, and allows them to choose the Lightning fee structure they want to send nearly costless transactions.
There are also more people willing to accept Lightning payments, including those that are traditionally considered as “offline” transactions: for example, El Salvador’s adoption of bitcoin allowed for the creation and encouragement of Lightning payment-friendly commercial and tourist zones.
Lightning Network payments can now be used not only to interface with real-world merchants that accept bitcoin, but also with services like Bitrefill that allow for the topup of phone minutes and the purchase of different virtual gift cards. Moon allows for the purchase of prepaid American debit cards with Lightning. Even in places where merchants aren’t widely accepting Lightning the way they do with credit cards, there are ways for bitcoin to interface with the physical world through Lightning.
While this might seem distant and abstract for some in countries like the United States or for those without many cross-border payment needs, there is a ton of demand for moving through financial slowness in emerging, high-growth economies where remittances and cross-border payments have heavier weight.
The options to do more and more sophisticated payments in Lightning now abound, with solutions such as Strike. The amount of Lightning Network activity continues to increase year-on-year, with more nodes and more transactions being folded within Lightning. This is true even in what is considered a financial “bear” market. In fact, this continues to be a quiet pattern: technical activity that increases at a linear or sometimes even faster scale, while the price of the underlying protocol declines or gyrates wildly because of financial speculation. This progress is tracked in newsletters like the ones for Lightning Labs or in the Lightning Network subreddit.
Bitcoin has long proven its mettle as a digital store of value, yet, for the other functions of a currency (unit of account and medium of exchange), the network has lagged a bit due to high transaction times and fees. Lightning Network’s continued development will help put bitcoin in the hands of more people and deliver more use cases across the board — and will empower bitcoin to truly become the currency of the future.