Blockchain and payments. It’s one of the most commonly used coupling when discussing the technology, and for good reason.Payments truly are one of the best use cases for blockchain. The payment use case is alluded to in the title of the Bitcoin whitepaper, “Bitcoin: A Peer-to-Peer Electronic Cash System.”
When interest in blockchain first surged, the expectations were lofty for businesses trying to wrap their head around the abundance of use cases. Blockchain was touted as the technology that would fix outdated processes within the United States, with a heavy emphasis on supply chains, healthcare systems and financial institutions. Many pilot programs conducted in the financial services and banking industry fell short on expectations and use cases for the sector began to subside.
However, over the years, there has been a significant shift in attitude towards blockchain and the technology has now proved as an opportune time for the financial industry to revisit the more mature, developed technology, using blockchain to improve existing products and services and offer new, more cost-effective products and solutions. Both public and private blockchains can be implemented across a variety of use cases in the financial world, opening a plethora of banking services that benefit both banks and customers by allowing faster, low-cost, heavily secure transactions.
One protocol that is of particular interest within the sector is the Lightning Network, a second layer solution of payment channels built on Bitcoin’s blockchain. The Lightning Network allows users to create peer-to-peer payment channels anchored into the underlying blockchain, and then route payments over its secondary network layer. Using this secondary network, the user can send a payment for settlement within seconds and at little to no cost while maintaining the same level of cryptographic assurance present at the base layer blockchain. The topology of this payment channel network resembles that of the Internet and is hailed as the beginning of a new internet of payment processing, where payments can be streamed in real time.
Companies and developers are building state-of-the-art solutions to take advantage of the Lightning Network. For example, Lightning Connect, BlockSpaces Lightning Finance solution, eliminates the headache of self-managed nodes with simplified integration, fully managed liquidity, and node management in a non-custodial way. By using Lightning Connect, businesses are able to utilize the benefits of the network without having to manage it themselves. As more companies begin using the solution, the level of interoperability will become unprecedented for settlement systems and could spark a transition to open and interoperable financial protocols within the sector.
Traditional banking and financial services are learning to co-exist and be complementary with emerging blockchain services. Legacy institutions are keen on the benefits that blockchain technology can provide, especially in the sense of using blockchain and digital assets for payments. Utilizing the Lightning Network is the first step in the process, and BlockSpaces is ready to help businesses take the lead.
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This post was written by Elevate, Inc.