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HomeUncategorizedLightning shines for its utility

Lightning shines for its utility

This is a commentary by Koji Higashi, Moderator of the Diamond Hands Community.

This is the second article based on the content of the “Understanding Lightning” report produced by the largest Lightning Network community in Japan, the Diamond Hands community. This report aims to provide an overview of Lightning Network technology and ecosystem for a non-technical audience. The first article can be found here.

Micropayments using Lightning Network Apps

Apps that integrate Lightning Network Payments can get immediate benefits Micropayment capabilities , low fees and instant settlement. As the Lightning Network removes most payments from the main Bitcoin blockchain, it can theoretically process millions of transactions per second while maintaining Bitcoin’s decentralized and permissionless nature — both of which Both are essential for the underlying technology as a real-world practical application.

Significantly reducing transaction costs and increasing speed globally using the Lightning Network is no small feat. It could potentially serve the billions of unbanked and/or underbanked people and reduce the cost of credit card fees worth billions of dollars.

Lightning Network could potentially be for billions of unbanked and/or underbanked people Provide services

Having said that, the cryptocurrency industry as a The whole, or “Web3” as it is now commonly referred to, seems to be more focused on different types of applications that tightly integrate proprietary tokens into the core of the service.

Indeed, Web3 projects with built-in tokens tend to be easier to raise capital from venture capitalists and achieve super-fast growth, thanks to the speculative nature of the token and the fact that early investors and Huge revenue expectations for users. The Lightning app definitely underperformed in this regard.

Although many Lightning Network applications utilize Lightning Network to distribute small amounts of Bitcoin (sats) to users, they will not get you rich quick – unlike some Web3 projects with tokens Do this occasionally, if you’re lucky (or if you’re an insider, more specifically).

Problem using Web3 application

Of course, not everything is perfect with Web3.

The incentives of tokens are often so strong that it is easy to change the purpose of using the service itself, thereby damaging the entire product. It blurs the line between an application’s actual utility and short-term speculative demand, often attracting the wrong types of users who don’t care about the service.

In other words, having an existing user base can hurt actual loyal users by integrating the token into the core of their service. Knowing this, it’s no surprise that established game studios like Blizzard publicly refuse to integrate NFTs into their platforms.

In addition, the use of cryptocurrency tokens often increases legal risks and compliance costs, which makes the The coin approach is impractical for many established companies. It is also undeniable that information asymmetry and lack of regulation of tokens often lead to fraud, with projects and early stage investors often passing on risk to retail investors.

What the Lightning App brings

On the other hand, integrating Lightning Payments in existing services is unlikely to work with existing product designs, rather than enhancing user experience and satisfaction.

Applications built on top of the Lightning Network allow for micropayments, opening the door for integrations with existing video games and podcasts.

Businesses are experimenting with new ways to take advantage of lightning

For example, Zebedee, one of the leading lightning gaming companies, is working to integrate micro-bitcoin rewards into existing games, easily turning them into “games – win games with real bitcoins”.

These rewards are relatively small and you won’t be able to make a living out of them. Conversely, inserting microbitcoin rewards can increase user retention and reduce user acquisition costs, making microreward distribution for game developers economically viable and sustainable.

The logic here is pretty simple in my opinion. You don’t really play purely for the money, but if you play some games for fun, you’d rather earn some cushion while doing it.

Likewise, Fountain applies Lightning Network to podcasts, rewarding users for listening to their favorite podcasts.

Neither use case defeats the original purpose of using the service itself. Lightning’s small rewards can gently nudge them to keep doing what they love, rather than trying to get people to play boring games or listen to offensive podcasts just to receive tokens and earn money.

in conclusion

While we look forward to more new use cases to be discovered in the future, there are already many specific use cases utilizing the Lightning Network for remittances, inter-exchange transfers, small rewards, gaming, etc., reducing transaction costs and improving user experience.

Lightning can be an effective tool for boosting products with real utility and existing user base, although it may not be enough to achieve rapid monetary growth from scratch, as some Web3 projects aim to achieve

The jury is still out on whether these Web3 applications can achieve initial high growth and long-term sustainability, but it seems to me that Lightning applications and Web3 serve different purposes and serve different requirements, using different technical architectures and tradeoffs anyway.

We should embrace these differences and build more interesting and cooler use cases with Lightning in the future.

This is a guest post by Koji Higashi. The views expressed are entirely their own and do not necessarily reflect the views of BTC Inc. or Bitcoin Magazine.

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