Crypto Payment Firm CoinGate To Allow Merchants To Trial Bitcoin’s Lightning Networkbr>
Crypto payment gateway CoinGate is launching a pilot program that will allow over 100 merchants to accept Lightning Network (LN) payments.
Founded in 2014, CoinGate enables various businesses to accept bitcoin and altcoin payments. It offers payouts either in bitcoin, or in EUR/USD, eliminating any risk associated with bitcoin price volatility. Users can also buy bitcoins from CoinGate using bank transfer, credit and debit cards, and mobile balance (phone credit), or sell their bitcoins to the company.
The Lightning Network is a “second layer” payment protocol that operates on top of the bitcoin blockchain. It enables much faster and cheaper transactions in high volumes between users, without the need for network confirmations. LN connects users (nodes) in a web of so-called “payment channels” independent of the actual bitcoin network. Using these channels, transactions can be made by users (nodes) “off-chain.”
According to CoinGate’s blog post, the merchants participating in the LN pilot include esports betting websites, online stores with crypto merchandise, servers and hosting services, and adult entertainment websites. The goal of the pilot, which will start this month, is to allow merchants to start accepting bitcoin and Litecoin LN payments.
Some experts believe that the Lightning Network still isn’t ready to support significant commercial transactions, but CoinGate CTO Rytis Bieliauskas said that there’s a greater good that will be achieved in being among the first to test the waters.
“It’s a very new technology. Inevitably there will be some bugs, either in our implementation or in the Lightning Network,” Bieliauskas said. “It will help, not just us, but the whole community because the bugs we find might help the whole protocol.”
The network is made up of bidirectional payment channels between two nodes. If at anytime either party drops the channel, the channel will close and be settled on the blockchain. CoinGate said it will cover any costs incurred if funds are lost in the pilot, as the technology is still in the early stages.
Last month, Diar, which covers analytical studies on global cryptocurrency developments, released a study assessing the Lightning Network. The study revealed that “the reliability of successfully routing a payment on the Lightning Network is still quite low,” especially for larger amounts.
“A current woe facing the LN is that it’s not ideal for sending large payments,” Diar said. “If only the nodes that have at least one channel with sufficient capacity to route the payment are considered, the probability of successfully routing the payment of less than $200 between random LN nodes is a mere 1%. However, there is an effort underway for what developers have dubbed as the Atomic Multipath Payment (AMP), which would allow large LN transactions to be split into many smaller transactions and then would be automatically joined back together.”