The Lighting Network enabled cheap and fast transactions using Bitcoin, breaking the stigma that you couldn’t buy a cup of coffee with Bitcoin, but six years after the original release of its whitepaper, the network is still not mainstream. Is the network just a hobby for Bitcoin aficionados, or do people actually use it for spending Bitcoin? Let’s find out.
Internet Native Money
The Lightning Network has provided Bitcoin an edge, making it exceptionally fit for the internet era. It has carved out an avenue for innovative business models that were previously inconceivable or economically unviable. One of these is micropayments. This capability opens the door for a more granular, pay-per-use approach to digital content consumption, a paradigm shift that could revolutionize industries such as online publishing, music, and video streaming. It allows users to pay per article, song, or minute of content rather than subscribing to entire services.
Furthermore, the Lightning Network’s peer-to-peer nature enhances content creators’ financial autonomy. Traditional platforms often act as intermediaries that take a significant cut of the profits. However, with Lightning, creators can receive payments directly from their audience. This maximizes their earnings and fosters a more intimate and transparent relationship between creators and consumers.
The Lightning Network’s permissionless nature underscores its disruptive potential. Unlike traditional financial systems, it does not require third-party approval to use. This lack of gatekeepers lowers barriers to entry and extends financial services to unbanked and underbanked populations worldwide. The open accessibility of the Lightning Network encapsulates the ethos of Bitcoin – democratizing financial power and fostering financial inclusion.
More recently, Nostr – an open-source social media protocol – demonstrated in practice how well the Lightning Network fits the use case for internet native money. With Nostr, you can not only like a “post”, but you can also send money to its author. This feature is called “Zaps”, and four months after it was released, it reached one million payments.
This is an average of 8,300 zaps per day, an impressive number for a network that is yet to surpass 3,000 daily active users. To put it in perspective, Twitter has about 260 million active users.
Bitcoin Circular Economies
In recent years, the emergence of Bitcoin circular economies has marked a significant shift in how communities interact with money, transforming lives in the process. One notable example is Bitcoin Beach in El Zonte, El Salvador. This initiative transformed a small surf village into a dynamic Bitcoin economy, utilizing the Lightning Network as the backbone for financial transactions. The success of Bitcoin Beach has inspired similar projects worldwide, creating a growing network of Bitcoin-enabled communities.
Take “Praia Bitcoin” in Jericoacoara, Brazil, and “Bitcoin Ekasi” in Mossel Bay, South Africa. These places have harnessed the power of Bitcoin and the Lightning Network to address their communities’ financial exclusion challenges. By adopting Bitcoin as money, these communities have empowered unbanked individuals, giving them access to secure, low-cost, and frictionless financial transactions. Furthermore, entrepreneurs and small businesses in these areas have also benefitted, as they can now participate in the global economy without the constraints of traditional banking systems or the high costs of payment processors.
Moreover, these Bitcoin circular economies are helping to rejuvenate local economies by making them attractive to a global cohort of digital nomads and Bitcoin enthusiasts. Tourists visiting these locations no longer need to worry about the costs and complexities associated with currency exchange. They can spend Bitcoin using the Lightning Network, which offers instant transactions with negligible fees. This seamless transactional experience incentivizes tourism, bringing an influx of economic activity that can make a significant difference, especially for communities in vulnerable conditions.
The BtcMap website serves as a comprehensive catalog of these Bitcoin circular economies, neatly presenting the merchants who accept Bitcoin via the Lightning Network on its map. As it stands today, the site boasts over 240 registered communities, with the most prominent among them featuring more than 150 locations that welcome Bitcoin payments via the Lightning Network.
The Lightning Network’s unique attributes, such as its capacity for microtransactions and lack of need for third-party intermediaries, are particularly beneficial for these economies. It provides an adaptable financial infrastructure that can accommodate various commercial activities, from small-scale vending to substantial entrepreneurial ventures.
Spending vs Holding
A rift often divides enthusiasts: holders and spenders. Holders see Bitcoin as a form of digital gold, an asset to be acquired and held onto, anticipating its value will skyrocket. On the other hand, spenders treat Bitcoin as a currency, using it for everyday transactions, embodying the original vision of Bitcoin as “peer-to-peer electronic cash.”
While both perspectives are valid, considering the potential for Bitcoin’s price appreciation and its foundational purpose, exploring the argument for spending is important, especially in the context of the Lightning Network and Bitcoin circular economies.
Spending Bitcoin contributes to the practical utility of the currency, fueling its acceptance and normalization in day-to-day commerce. Utilizing Bitcoin as a transactional currency not only fosters the development of infrastructure and technology necessary for widespread adoption but also exposes more people to Bitcoin and how it functions. This kind of engagement leads to increased understanding, which in turn can drive further adoption.
Also, spending Bitcoin, particularly in the developing Bitcoin circular economies, has a tangible impact on people’s lives. It supports local businesses and communities, empowers the unbanked, and contributes to the global transition toward a more inclusive financial system.
By using Bitcoin as a medium of exchange, spenders participate in proving Bitcoin’s resilience as a functioning monetary system. The more Bitcoin is used, the more robust and secure the network becomes, reinforcing its value proposition over time.
The rise of solutions like the Lightning Network mitigates one of the main deterrents to spending Bitcoin – transaction speed and cost. With instantaneous transactions and negligible fees, the barriers to using Bitcoin daily diminish considerably.
While it’s understandable why many choose to hold onto their Bitcoin, considering the potential future value, it’s important to remember that a currency’s power lies not just in its stored value but also in its usability. By spending on Bitcoin, we support its growth and wider adoption and contribute to its primary function as a currency – a medium of exchange for goods and services.
One of the benefits of spending Bitcoin through the Lightning Network it’s the privacy guarantees that senders have. Their identity is safeguarded by ‘onion routing,’ a technique that effectively shields the sender’s identity from the nodes participating in payment routing. Even the receiver is kept in the dark about the sender’s identity. To delve deeper into these privacy guarantees, we encourage you to check out our extensive breakdown on the topic.
Despite the common conception that Bitcoin’s utility is limited to a store of value, the development of the Lightning Network challenges this narrative, fostering a more transaction-oriented use of Bitcoin. For instance, the ability to make microtransactions has sparked innovative business models such as pay-per-use digital content. Furthermore, the direct, peer-to-peer nature of the Lightning Network has empowered content creators, allowing for greater earnings and fostering more transparent relationships with their audience.
In addition to this, the Lightning Network’s permissionless nature and absence of gatekeepers make it an attractive alternative to traditional financial systems, as demonstrated by the rise of online platforms like Nostr and the creation of Bitcoin circular economies. The success of these endeavors can be seen in vibrant communities like Bitcoin Beach in El Salvador, Praia Bitcoin in Brazil, and Bitcoin Ekasi in South Africa, where Bitcoin and the Lightning Network have provided a viable solution to financial exclusion.
Yet, the debate between those who view Bitcoin as an asset to hold versus a currency to spend persists. It’s crucial to remember that spending Bitcoin not only fuels its practical utility but also contributes to the broader goal of financial inclusion and supports the development of local businesses and communities.
So, in response to the question, “Do people actually use Lightning to spend Bitcoin?” the evidence suggests that not only are people using it, but they are doing so in creative and transformative ways that were previously inconceivable. The Lightning Network is far from just a hobby for Bitcoin enthusiasts; it’s a dynamic platform fostering innovation, financial inclusion, and economic empowerment.