Crypto exchange Coinbase says that the Lightning Network has the potential to disrupt the massive $150 billion payments industry.
Lightning Network is a layer-2 scaling solution built on top of Bitcoin that aims to enable instant and cost-effective transactions for BTC.
In a new blog post, Coinbase says the Lightning Network is targeting a more real-world use case compared to much of the speculative-driven growth on smart contract platforms.
With Visa and Mastercard pulling in around $24 billion in 2021 by collecting 2-3% of every transaction completed with their cards, Coinbase says the Lightning Network could be the innovation that undercuts the world’s largest payment processors.
“Humble beginnings aside, the potential to turn crypto’s most valuable asset into a true medium of exchange has the power to bring greater financial inclusion to anyone with a smartphone. The ability to cost-effectively route fiat transactions over Lightning rails without users ever knowing they ‘re using Bitcoin can disrupt $150B+* a year industries.
What Visa/Mastercard is for fiat currencies, Lightning can be for Bitcoin. The combination of a universally accessible payment network attop the world’s first open-source protocol for money can help Bitcoin evolve into a true global reserve currency.”
While Lightning has much potential, Coinbase notes that adoption is still slow. In addition, Lightning has to overcome the massive network effects of Visa and Mastercard.
“Lightning is still cumbersome for new users and merchants. Additionally, onboarding low-income users in developing countries remains a major challenge to fulfilling the promise of Lightning remittances.
Lastly, the lack of compliance and regulatory frameworks limit the ability for existing payment and banking service providers to onboard and serve a global customer base.”
Coinbase says that should Lightning Network become meaningfully adopted, we can expect developing countries with high inflation and “more smartphones than bank accounts” to lead the way.
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Featured Image: Shutterstock/Liu Zishan
