Crypto Exchange Coinbase Adds Support For Bitcoin Lightning Network For Faster And More Cost-Effective Transactions
In Brief
Coinbase added support for Bitcoin Lightning Network providing a quicker and more cost-effective method for conducting Bitcoin transactions.
Cryptocurrency exchange Coinbase announced it has added support for the Bitcoin Lightning Network, a Layer 2 solution developed atop Bitcoin. This addition offers users a quicker and more cost-effective method for conducting transactions, including sending, receiving, or paying Bitcoin directly from their accounts.
In the past, Bitcoin transfers through Coinbase were handled on-chain, resulting in transaction times ranging from 10 minutes to two hours. Additionally, users often encountered elevated fees, especially during network congestion.
On Coinbase, Lightning Network transactions will be limited to sending only and entail a processing fee of 0.1%. These transactions are expected to be processed within seconds. Initially, Coinbase users will have a withdrawal limit of $2,000, resulting in a maximum withdrawal fee of $2. While this fee is higher than the average for Ethereum Layer 2 transactions, it is lower than fees incurred on the Bitcoin blockchain.
In a blog post, the Coinbase team emphasized its ongoing support for the Bitcoin ecosystem since its inception, including various investments through Coinbase Ventures. The decision to add support for Lightning Network aligns with the company’s commitment to enhancing the cryptocurrency ecosystem, offering increased utility to Coinbase customers.
Coinbase CEO Brian Armstrong hinted at potential support for the Lightning Network in April 2023. Subsequently, in September 2023, the exchange officially announced its plans to integrate the Bitcoin Layer 2 solution.
This recent integration follows similar moves by some of Coinbase prominent competitors. Bitfinex became the first major cryptocurrency exchange to offer Lightning Network support in 2019. OKX followed suit with Lightning Network support in 2021, followed by Kraken in 2022. Binance completed its Lightning Network integration in July 2023.
What Is Lightning Network?
Introduced in 2017, the Lightning Network operates as a Layer 2 protocol built atop the Bitcoin blockchain. Its primary aim is to tackle scalability concerns by employing bi-directional payment channels. These channels facilitate nearly instantaneous transactions with minimal fees conducted off-chain, thereby avoiding immediate settlement on the base layer of the blockchain.
On the Lightning Network, fees consist of two components: a flat-rate base fee, which can be as low as one satoshi, the smallest unit of Bitcoin, equivalent to less than $0.01, and a liquidity provider fee or fee rate, calculated as a percentage based on the payment’s value. Node operators within the network can set their fees at different levels to account for the liquidity they commit to the network.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
