Xapo Bank announced it has integrated the Lightning Network and formed a partnership with Lightspark. This collaboration will make the organization the first private bank to accept Lightning payments with a complete license.
According to a press release, Xapo Bank users can now pay instantly for minor purchases up to $100 at any vendor accepting Lightning payments, without incurring exorbitant transaction fees or lengthy blockchain confirmation wait times.
Xapo Bank Bridges The Gap Using Lightning Network
Xapo intends for the integration to bridge the gap between traditional finance and cryptocurrency. The platform currently offers a yearly interest rate of 4.1% on U.S. dollars in accounts with a deposit guarantee of $100,000, and will eventually offer up to 1% on Bitcoin.
Seamus Rocca, CEO of Xapo Bank, said about the partnership:
“By integrating with the hyper-efficient Lightning Network, we are the first bank in the world to streamline this process and allow our members to pay for small purchases with Bitcoin without having to convert to USD first.”
How Lightning Works
The Lightning Network is a second-layer scaling solution for Bitcoin and other cryptocurrencies. It is designed to address the scalability issues of Bitcoin, which is limited in the number of transactions it can process per second. It allows for faster, cheaper, and more private transactions than on-chain transactions.
The Lightning Network is built on top of the Bitcoin blockchain and uses smart contracts to create payment channels between users. These payment channels allow users to transact without the need for each transaction to be recorded on the blockchain. Instead, only the opening and closing transactions of the channel are recorded on the blockchain.
To use the Lightning Network, two users must open a payment channel between them by creating a multi-signature transaction on the blockchain. Once the channel is open, they can transact with each other by exchanging signed transactions off-chain. Each transaction updates the balances of the channel, and the final balances are recorded on the blockchain when the channel is closed.
A Fully Fledged Bank
Xapo has received a banking license, primary membership with Visa and Mastercard, and SWIFT membership since initiating the process in 2019. This means that the company can interact directly with correspondent banks, as opposed to going through payment businesses or other parties, and has access to money market accounts.
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Rocca stressed the significance of the newly formed collaboration in light of the regulatory pressures currently exerted on cryptocurrency exchanges, yield-generating products, and stablecoins.
-Featured image from Coin Culture