Binance, one of the world’s leading cryptocurrency exchanges, has successfully integrated the Bitcoin Lightning Network into its platform, taking a big step toward making Bitcoin transactions more efficient. The integration, announced on July 17, 2023, enables Binance users to leverage the power of the Lightning Network for Bitcoin deposits and withdrawals.
The Lightning Network is a second-layer protocol that sits on top of the blockchain and enables fast transactions between peers. This system is not limited to Bitcoin; it is also compatible with other cryptocurrencies, such as Litecoin. Although it runs separately with its own nodes and software, it remains connected to the main chain. To transfer in or out of the Lightning Network, users must perform specific transactions on the blockchain.
Once a transaction is initiated on the Lightning Network, a smart contract is formed with another participant, generating a private ledger called a "channel". The channel allows for a series of transactions, with each transaction adjusting the balance. The unique structure of this setup ensures security and prevents fraudulent activity. At any given time, any one participant can broadcast the current state of the channel to the blockchain, which then distributes the balances to the respective parties on the chain. As a result, the Lightning Network offers ultra-fast transactions, with speeds limited only by the user's internet connection.
Binance users can now select “LIGHTNING” when making Bitcoin deposits or withdrawals. This option is available alongside other options such as BNB Smart Chain (BEP-20), Bitcoin, BNB Beacon Chain (BEP2), BTC (SegWit), and Ethereum ERC-20.
Source: Binance
Binance hinted at its decision to integrate the Lightning Network in May after temporarily halting BTC withdrawals due to a surge in pending transactions. This surge was largely attributed to the creation of memecoins on Bitcoin in the form of BRC-20 tokens, a new token standard on the network.
With this move, Binance joins other major exchanges such as Bitfinex, River Financial, OKX, Kraken, and CoinCorner, all of which have already integrated the Lightning Network. Coinbase has stated plans to incorporate the Bitcoin Layer 2 network, but has not yet provided a specific timeline.
