- Coinbase customers would have a $2,000 withdrawal cap at launch.
- Lightning Network aims to facilitate off-chain, near-instant, low-fee transactions.
Launching support for the Lightning Network today, crypto exchange Coinbase gives its customers a quicker and cheaper option to transfer, receive, or pay with bitcoin straight from their account.
In the past, Coinbase’s bitcoin transfers were handled on-chain, which meant that they may take anywhere from ten minutes to two hours and would incur significant fees when the network was busy.
Tackling Scalability Issues
Moreover, by implementing bidirectional payment channels, the Lightning Network—a Layer 2 protocol that sits atop the Bitcoin blockchain and was launched in 2017—aims to solve scalability problems by facilitating off-chain, near-instant, low-fee transactions that do not need quick settlement on the base layer.
Coinbase’s protocol specialist and Lightning integration lead Viktor Bunin stated:
“Growing Bitcoin adoption increases economic freedom in the world. I’m thrilled that our Lightning integration is live to make Bitcoin more useful and accessible worldwide. Offering faster and cheaper BTC payments through our partnership with Lightspark is another huge milestone for the ecosystem.”
One satoshi, the smallest unit of bitcoin and comparable to less than $0.01, is the flat rate base price on the Lightning Network. Then there’s the liquidity provider fee, which is a percentage based on the amount of the payment. Network node operators have the option to compensate for locking up liquidity by setting their fees at varied amounts.
Furthermore, Lightning transactions on Coinbase, according to Bunin, incur a 0.1% processing cost and should be completed in a matter of seconds. He said that Coinbase customers would have a $2,000 withdrawal cap at launch, which translates to a $2 maximum withdrawal charge.
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