Bitcoin Lightning Network – How Does It Help Casinos?
Bitcoin may be one of the most unique and disruptive asset classes to date, but not even Bitcoin is invulnerable to a conventional roadblock: scalability.
In the Bitcoin Blockchain, the blocks are responsible for recording and verifying all transactions made on the bitcoin network. Naturally, they are limited in size and frequency. With the rising popularity of Bitcoin, the capacity of these blocks are struggling to keep up with the loads of transactions made (approximately 3.3 and 7 transactions per second). This has created a supply and demand market for block space that has resulted in ever-rising fees for Bitcoin transactions.
This problem is a serious threat for the future of Bitcoin. If it cannot scale to handle large amounts of transactions, how it can it ever hope to be an alternative payment solution? The solution that many Bitcoin enthusiasts are banking on is the implementation of Layer 2 Systems, primarily the Lightning Network.
The Lightning Network operates on top of the already existing Bitcoin Blockchain. In short, the Lightning Network opens alternative payment channels for peer to peer crypto transactions to be made from only one payment channel on the main blockchain. It does this through creating additional channels from an existing block that are capable of sending an infinite number of transactions at a relatively low cost without broadcasting those transactions to the blockchain.
An industry that can benefit greatly from the implementation of The Lightning Network are cryptocurrency casinos. Currently, every transaction must be made through the blockchain and this is timely and costly to do. Traditional casinos don’t suffer from this constraint. Traditional casinos exchange money into chips and record this transaction. From this point, the chips can be lost and won and change ownership several times. But the casino does not need to record these changes in ownership; they only care for when the chips are first purchased and when they are exchanged back into money.
The Lightning Network would replicate this process for Crypto Casinos. The initial purchase on a crypto casino would be recorded on the Blockchain and all other exchanges would work through the Lightning Network to avoid any bottlenecks. This will result in quicker payment transaction fulfillments and lower fees for both the players and casinos.
With the increase in scalability for Bitcoin transactions comes an increase in concern over the Lightning Network’s security. As recently as last week, hackers tried to gain access to the payment channels opened through the Lightning Network and ironically came away losing money from the unsuccessful attempt as a bitcoin transaction was needed to open the payment channel in the first place.
Plans have been announced to release the Lightning Network for public use as soon as December 2018. Assuming that it works as intended, Bitcoin will be a far more attractive payment option for businesses to accept. If the Lightning Network does indeed solve Bitcoin’s current scalability problems, then it is highly likely that developing Lightning Networks for other cryptocurrencies is the logical next step.