We are pleased to announce that you can now use our newest payment option for instant payment with incredibly low fees - Bitcoin Lightning Network payments. We have been accepting Bitcoin and Litecoin blockchain payments for many years and we’re happy to add to the range of crypto payment methods available to our clients. But why should you use the Lightning Network?
The problem with Bitcoin payments
Early on in the development of Bitcoin one major issue became apparent - the blockchain was not scalable enough to support the thousands of transactions per second needed for the cryptocurrency to achieve universal adoption. While Visa, for example, processes an average of 1,700 tps (transactions per second) and is able to process up to 65,000 tps, Bitcoin can handle only up to 7 tps. This means that with more and more people making Bitcoin payments, transaction fees have increased dramatically. There have been numerous attempts to address this issue and find a solution that is fast, cheap and able to support the transactions of the world’s population. The one that has gained the greatest popularity and stood the test of time is the Lightning Network. Many believe this is the solution needed for Bitcoin to be adopted worldwide as a means of payment.
What is the Lightning Network?
The Lightning Network is a layer 2 solution to the scalability problem of Bitcoin. That means that rather than changing the rules of the blockchain system, it is built on top of it. It allows for fast and cheap off-chain payments and does away with block confirmation times. The payments are made on a network secured by cryptographic contracts, which can support millions of transactions per second, making it highly scalable. As the transactions happen outside the blockchain, the fees are negligible as compared to miner fees on the blockchain. It is even possible to make transactions across blockchains, provided that they support the same cryptographic hash function. Additionally, the Lightning Network provides enhanse the privacy in Bitcoin blockchain. On the blockchain, information about the payments is broadcasted to the entire network. On the Lightning network, however, only the participating parties receive information about the transaction.
How does it work?
In a nutshell, the Lightning Network (shortly LN) is a second layer protocol (or Layer 2) - a decentralized network which is not a blockchain, but rather a series of interconnected payment channels and is build on top of a blockchain (Bitcoin). It allows for instant payments. Each channel is created by opening a 2-party multi-signature account. The two parties are called nodes and each node can open the channel by locking some funds on the blockchain and unlocking them on the Lightning Network. A balance sheet is created and all transactions are reflected in it. But opening a channel with every person or business you want to send BTC to is not very practical. Thankfully, there is a solution to that! If there is a series of channels connecting you and whoever you want to make a transfer to, the payment is routed through those channels and you don’t need to open a new one. This routing is secured by smart contracts and no intermediary node can steal your hard-earned satoshis.
Here's a simple example. Let’s say Anna wants to pay VPSBG for her new VPS service with BTC using the Lightning Network. She receives a LN invoice from us, which can be described as a payment request that define the transaction which contain information about the amount and recipient. It is provided as hash or a QR code that can be scanned. Anna, however, does not have a payment channel with VPSBG. So does she need to open a new channel? Not necessarily. Anna has a channel with her friend Boris and he has established a channel with VPSBG to pay the fees for his web hosting plan. Thus, when Anna pays the invoice in her wallet, the payment is routed to Boris and then from Boris to the node of VPSBG. All of this happens automatically and instantly under the hood. That way Anna can easily pay for her services without opening a new channel especially for this purpose. And what’s best - the payment will be lightning fast and will cost her next to nothing!
We hope you are as excited about the Lightning Network as we are! If you’d like to help us develop our node, consider connecting to us on the Lightning Network:
In addition to helping us out, you can use the channel to pay for any of our services in the future.