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The recent surge in Bitcoin (BTC) transaction fees has pushed one of the largest cryptocurrency exchanges to move to the Bitcoin Lightning network. Following the second withdrawal halt, Binance announced that it would be working on “enabling BTC Lightning Network withdrawals to help in these situations.”
To prevent a similar recurrence in the future, our fees have been adjusted. We will continue to monitor on-chain activity and adjust accordingly if needed.
Our team has also been working on enabling BTC Lightning Network withdrawals, which will help in such situations.
— Binance (@binance) May 8, 2023
The Lightning Network (abbreviated as LN or simply “Lightning”) is a federated system for low-cost, near-instantaneous payments built on bitcoin. When the bitcoin mempool (the space that transactions collect before confirmation) is full or busy, the Lightning network is unaffected.
To date, several major cryptocurrency exchanges have integrated the Lightning Network, including Bitfinex, River, OKX, Kraken, and CoinCorner. If implemented correctly, the Lightning Network will allow users to immediately withdraw and send bitcoin from wallets, bypassing the overloaded bitcoin chain.
Fees on Bitcoin are rising, and there are still many Bitcoin (to fiat) exchanges that haven’t adopted Lightning deposits and withdrawals
Technical challenges are not the reason. Solutions like @RiverRLS exist that make integration fast and easy for any business. The issue is… pic.twitter.com/WR5u7cjMCx
— Sam Wouters (@SDWouters) May 8, 2023
The largest cryptocurrency exchange in the US, Coinbase, is also gearing up for LN. In addition to comments that CEO Brian Armstrong will be integrating LN soon, Armstrong finally sent Cointelegraph reporter Joe Hall $100 via the Lightning Network, demonstrating that he was familiar with the network.
European Bitcoin exchanges also use LN. Adem Bilikan, CTO of Swiss Bitcoin exchange Relai, told Cointelegraph:
“We believe that Bitcoin is the best savings technology ever invented. But you should be able to spend and send BTC as quickly and cheaply as possible. Lightning Network is the best solution to solve this problem, no matter what the transaction fees on the network look like.”
Swiss Bitcoin exchange, PocketBitcoin, recently tweeted that it would “launch this thing with Lightning” in response to higher and higher fees on the Bitcoin underlying chain.
Related: Bitcoin Lightning network capacity reaches 5k BTC
However, given that LN is a relatively new solution in the cryptocurrency space, a payment failure may occur. The network grows and scales organically, but more liquidity can help the network scale faster. Paolo Ardoino, CTO of Bitfinex, shed some light on the situation:
“The Bitfinex node is the most interconnected node in the entire Lightning Network. It is also the largest, providing liquidity to most of the other nodes. Therefore, the probability of failure is extremely small.
True to form, Bitfinex’s CTO tweeted in response to the high fees users have to charge their chosen cryptocurrency exchange for LN integration. Binance and Coinbase are jumping on board, other major exchanges Gemini, KuCoin and ByBit have yet to announce or discuss LN implementation.