Monday, March 27

Interbank praises Bitcoin’s Lightning Network

The last report of the Inter Bank on cryptocurrencies, published this Tuesday (28), exposes issues of scalability, security and decentralization. On the occasion, the Bank cites the need to use the Lightning Network in Bitcoin.

In addition to the waiting time of around 10 minutes and expensive fees for micro transactions, these small transactions end up taking up space on the blockchain and could be done on LN, improving everyone’s experience.

Average time and rates in the Bitcoin blockchain. Source: Interbank

Banco Inter also highlights the growth of Lightning Network after the Bitcoin Law was implemented in El Salvador. It is the main means by which Salvadorans make payments in BTC in their daily lives.

Scalability Solutions

Banco Inter’s report points to the scalability trilemma, a term used to indicate that it is possible to achieve only two of the three points: scalability, security and decentralization.

An example of the focus on scalability and security is Visa, with 65,000 transactions per second (TPS), but fully centralized. Bitcoin, with its focus on decentralization and security, lacks scalability.

Transactions per second on various payment methods.  Source: Interbank
Transactions per second on various payment methods. Source: Interbank

With this, Banco Inter points out that, for Bitcoin to reach the same level as Visa in TPS, it would be necessary to increase the size of BTC blocks to 8 GB.

However, this is unfeasible, as the bank itself points out, after all few would have equipment to store transactions, making Bitcoin centralized like Solana, which only has 200 nodes. Furthermore, there would also be problems in propagating blocks of such size.

Lightning Network is the solution, says Banco Inter

Following the report, Inter cites the first country to adopt Bitcoin as its legal currency, El Salvador, noting that it would be necessary to solve the scalability problem for BTC to be used as the currency in the country.

Fortunately that solution already exists, the Lightning Network. Although at an early stage and not supported by many exchanges, some such as Bitfinex are already working with LN.

In addition to citizens of El Salvador, others are already using LN for transfers of small amounts like gift card purchases and even to send tips on Twitter.

“Today, the average fee per transaction is around $2, or 11.5 reais. This cost is extreme, especially for carrying out
of microtransactions.”

Although few establishments and people in the world are using LN, as was BTC in its early years, the fact that transactions are instantaneous and with fees as small as 1 satoshi is a good reason to expect even more adoption.

Finally, it is worth noting that banks are increasingly interested in Bitcoin and cryptocurrencies. Banco Inter itself has published other reports on the metaverse and also on cryptocurrencies in general.