Coinbase, the largest U.S. cryptocurrency exchange by trading volume, has announced the integration of the Lightning Network, in a bid to enhance transaction speed and reduce costs for its users.
Key Features of the Lightning Network Integration
According to the update, the new support allows Coinbase customers to send, receive, or pay with Bitcoin through the Lightning Network, providing a more efficient and cost-effective method for Bitcoin transactions.
Prior to the integration, Bitcoin transfers on Coinbase were processed on-chain, leading to delays of 10 minutes to two hours during network congestion and high fees. This integration is coming less than a week after its mega Bitcoin bonanza to celebrate the halving.
The Lightning Network, a Layer 2 protocol built on top of the Bitcoin blockchain, is more efficient as it addresses scalability issues by enabling near-instant, low-fee transactions through bi-directional payment channels.
Starting today, support for the Lightning Network via @lightspark will begin rolling out.
Enjoy instant, low-cost BTC transfers.
Learn more: https://t.co/6YPiWgIyyf pic.twitter.com/ufOhO7Qe7i
— Coinbase 🛡️ (@coinbase) April 30, 2024
Viktor Bunin, Coinbase’s protocol specialist and Lightning integration lead, expressed enthusiasm about the integration, saying,
“Growing Bitcoin adoption increases economic freedom in the world. Offering faster and cheaper BTC payments through our partnership with Lightspark is another huge milestone for the ecosystem.”
The Lightning Network’s fee structure consists of a flat rate base fee as low as one satoshi (equivalent to less than $0.01) and a liquidity provider fee, which is a percentage of the transaction value.
Impact of Integration on Coinbase Users
On its part, Coinbase will charge a 0.1% processing fee for Lightning transactions, limited to sends only. Users can withdraw up to $2,000, with a maximum fee of $2, which is considerably lower than on-chain Bitcoin transactions.
Coinbase set the conservative limit for Lightning Network transactions because larger payments tend to have a lower success rate due to liquidity constraints. With the integration, Coinbase says the cost to send Bitcoin globally is now 20 times lower than credit card transactions and significantly lower than traditional wire transfers.
Coinbase’s Lightning Network integration comes after several of its major crypto exchange rivals, such as Bitfinex, OKX, Kraken, and Binance, implemented support for the Lightning Network in previous years.
