The main “disadvantage” attributed by Bitcoin’s critics is that you cannot easily and directly buy your coffee with it. We put the word disadvantage in quotes, because in fact Bitcoin is not designed for this purpose.
In the famous trilemma faced by Satoshi Nakamoto, two of the three characteristics had to be chosen: decentralisation, security and scalability. The founder of Bitcoin chose – rightly, as it turned out – to focus on the first two.
Why not all three? Because it is practically impossible to develop all three at the same time, by any payment method.
The development of specific features separate Bitcoin from other currencies. Because it was chosen to operate as a decentralized network, not controlled by any centralized entity such as a bank or government. In practice, the design is implemented through blockchain technology and the participation of numerous independent nodes.
Security is ensured by recording data on a public and transparent blockchain. Especially at its current size, it is impossible for anyone – no matter how powerful – to tamper with, delete or even prevent the data from being transferred. The validity and confirmation of transactions is ensured by the use of encrypted algorithms, which are processed and approved by hundreds of thousands of miners and notes scattered around the world.
We have mentioned it many times in this column and we repeat it often because it is difficult to grasp for those who are superficially involved in the subject. Bitcoin is the most reliable way of storing and moving information known to man to date.
However, this has been achieved at the expense of ease of use and speed. Scalability is about the ability of the network to support a high volume of transactions.
Bitcoin’s prototypical settings have limited the possibility of large volumes of transactions. This leads to long confirmation times and high fees for transactions.
When you need to transfer millions of dollars worth of Bitcoin, you focus on security. You are not particularly interested in the transfer being done in seconds, as much as it being done in the most reliable and secure way possible, without anyone having the ability to interfere and hinder the process or tamper with the data. In this case you are using the basic (first) layer of the network.
But when the transaction is worth a few dollars, what you care about above all is ease of transaction and speed. There the solution has been provided by the operation of a second-level technology, the Lightning Network.
To have a measure of comparison with established currencies such as the dollar, the cheque is second-level and the credit card is third-level.
Voltage and Google
Launched in 2020, Voltage’s mission is to provide Lightning Network services, enabling payment processing by allowing corporate entities and individuals to send and receive payments in real-time, with near-zero fees.
Voltage serves branded brands that have payments at the core of their businesses, such as financial or fintech companies. Companies for whom it is critical to save money transfer costs and cross-border payments or provide the ability to make micro-payments.
What’s important in this business effort is that Voltage is leveraging the Google Cloud platform to expand its providers and hosting locations. Through there, its customers can set up Bitcoin and Lightning Nodes in various locations worldwide.
Google is taking a Lightning-friendly approach, unlike Apple, which recently removed from the App Store its Damus app, a decentralized Lightning-friendly social platform. Tellingly, Google’s investment arm, Google Ventures (GV), participated with $6 million in funding in Voltage in 2021.
Voltage helps solve three problems.
- First, it helps businesses process money transfers through the Lightning Network.
- Second, through this payment method, businesses can reach a global audience of customers.
- Finally, by enabling micro-transactions (payment of one cent or less), they are able to reach a potentially huge consumer audience that was impossible to tap into with traditional payment methods.
Micro-payments open up new avenues of entrepreneurship and marketing. For example, a business can offer a monthly subscription for one cent. Or sell a digital book, which the reader pays for per page, not in full. If he doesn’t like it and drops it in the first 10 pages, he can pay for just those.
The possibilities are really huge, especially in the digital business realm. Until now it has not been possible due to the transaction costs (clearing, back office, etc.) of traditional payment methods through banking institutions, such as cards.
Especially when it comes to cross-border payments the task has been literally impossible. The only way out is through the Lightning Network, at least with the technological possibilities we know to exist today.
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- Are Cryptocurrency Transactions Anonymous?
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