The Lightning Network is taking off in almost every aspect. Network growth, users, and businesses interested in learning about and deploying Lightning as part of their product line are trending up at an almost exponential rate. And why shouldn’t they?
The Lightning Network offers instant permissionless settlement across any distance for almost no cost. This has never been possible before. We are currently experiencing the dawn of the money on the internet.
The ritual that we are all used to at this point of having to input our name, address, credit card, and other information in order to buy a good or service on the internet will be seen as a blip in the history of the internet in the coming decades.
The few decades when the internet did not have native money will be seen as a hilarious mess by internet users of the future. The Lightning Network can do more than just facilitate purchases of goods and services, though.
The power of this decentralized network can be leveraged in extremely creative ways that could never be done with contemporary payment systems.
This article will go through several examples of what I expect the Lightning Network to provide the internet and the world in the coming years as creative people and builders learn more and innovate.
The Power of Internet Native Money
Play through in your mind briefly the entire process of buying something online in the modern age. While some friction has been reduced with services such as Apples Pay and PayPal, the main issue remains that these services are cemented into a legacy system that is controlled, censorable, slow, unreliable, and difficult to set up.
What if we could power up our ability to exchange value with other consenting parties anywhere in the world without permission and without the constant fear that our accounts may be closed down or charged back for any reason? This is what the Lightning Network enables.
The Lightning Network powers up the internet in many ways. Imagine a web browser that you run yourself that has remote access to funds that you control on your own Lightning Network node or wallet. Now you go to Amazon and instead of having to go through the 4+ page checkout process, you can click one button. Buy Now. After clicking this button, behind the scenes Amazon generates an LN invoice, your node pays it, and you get a confirmation that you bought the item. This purchase process happens in 1-2 seconds.
Next, what about internet native services such as news articles? Journalism has for a long time had trouble monetizing on the internet. Ads are annoying and cluttering for users, and subscriptions are tiresome to manage. Imagine if you go to your favorite news website, and click an article headline, and pay as you read. Your browser and the website or synced up so that you are paying for what you consume and nothing more.
Why would someone pay an $8/mo subscription fee when they only plan on reading a single article that interests them? This concept is already deployed in the wild with Podcasting 2.0 with what is called Value for Value. Listeners are literally streaming money in extremely small increments over time as they listen to a podcast. This can be deployed for other types of content such as video and literature as well.
4 Key Use Cases for Lightning Network
Market Settlements
Commodity markets settle their books and need higher frequency payments based on how fast global commerce moves. Quant traders also need fast payments, every millisecond matters.
There are instances as well where market makers have insider information based on how retail money flows throughout markets. The Lighting Network could create more transparency as to where money is flowing to potentially balance the playing field of insider info.
International Commerce Easier
The Lightning Network and Bitcoin in general empower the commerce of goods and online services over the internet for global commerce. Because the Lightning Network and Bitcoin do not recognize human-imposed geographical boundaries, a craftsman in a small country can now sell their goods to buyers anywhere in the world without the headaches of currency conversions or another yellow tape.
Annual cross-border remittances are estimated to be $600 billion. 3/4th of this flows to low and middle-income countries! The Lighting Network makes it possible for every global citizen to have access to money that can not be inflated, or extracted from their hands with excessive fees.
Businesses On Tight Cash Flow
Many businesses do not operate with excess cash reserves. Oftentimes bill payments to service providers can run 7-14 or more days behind due to needing accounts receivable.
The Lightning Network enables the capability for enterprises to make payments fractionally in real time for long-term debt.
Say for instance a $5,000 bill is due on the 1st of each month for the next 30 days of service. The Lightning Network could enable brands to pay $166.66 per day across the full 30 days so that those costs are not due upfront.
This is just one example of how Lightning can impact businesses by creating value for accounts receivable.
The cost of doing nothing vs. the cost of exploring the possibilities
Middle Men Avoidance
The traditional banking system we are all familiar with is extremely complex. The real nature of making a payment is obfuscated, but the fact remains that there are many parties in between the payer and the recipient all taking their cut.
For example, when you buy a gallon of milk from your local grocery with your bank debit card, several parties are taking fees including the issuing bank, the clearing bank, the credit card companies, and possibly more. This is costly for both the merchant and the customer as it drives up prices and wastes time.
The Lightning Network enables not only instant borderless payments, but also instant settlement with no middlemen taking a fixed cut. Many merchants extend discounts when users pay in Lightning as a result of this innovation. This lowers costs for consumers and reduces the risk for business owners as well as a reduction in a chargeback.
But it gets even better. This also applies to the payment point-of-sale systems as well. Unlike traditional point-of-sale systems such as clover, toast, or Shopify, a Lightning Network payment portal does not require a third party to host or manage.
The point-of-sale software itself can also be free and open source, thus saving the merchant money, and lowering prices for customers. To top it all off, you can actually pay Lightning Network invoices with dollars with apps such as Strike.
You don’t even have to accept or pay with bitcoin to get the benefits of using the bitcoin network! You simply just have to plug into the bitcoin network and you can move dollars on it which bypasses the rent-seeking institutions completely.
The Growth of Lightning
While the protocol continues to be developed and made more robust, the apps that are using Lightning to solve real problems are being built at a nonstop pace. Creative people all around the world see the power of the Lightning Network. There is a great directory of projects sorted into categories here.
If there’s one thing that is for sure, it is that the growth of the Lightning Network is being fueled by genuine necessity in an environment where the legacy tools are grossly inefficient. It is evident that the market forces that may underpin bitcoin’s acceptance have little to no effect on the growth of Lightning. It may be a good idea to see how the Lightning Network could improve efficiency and costs for your business as well.
Let us know what you are looking to accomplish at hello@voltage.cloud and we will be happy to book a free consultation.
