Although still a relatively new technology, the Bitcoin Lightning Network offers distinct advantages for a wide range of business operations.
This is an opinion piece by Matt Maraia, a CPA focused on the impact of changes in accounting regulations on the Bitcoin community.
Businesses today spend huge sums on credit card fees when processing customer payments, which ends up cutting into margins that are widely scrutinized by investors and management.
But the Lightning Network is introducing a new payment solution with the ability to process instant payments (using Bitcoin) for virtually no fees. It has decentralized guarantees equivalent to the Bitcoin network, ultimately using Bitcoin’s blockchain, which has not been hacked since its inception in 2009. active, this innovative technology built on “Bitcoin rails” presents a unique opportunity for CEOs and CFOs to improve profitability.
In fact, you can be anti-Bitcoin and still be able to extract the benefits of the Lightning Network into your business payment processes, avoiding the issues of bitcoin price variability.
Here are some of the key benefits of adopting the Lightning Network for businesses:
Improve margins, reduce costs
With collective redundancies circulating in the market, investors and managers naturally continue to scrutinize margins – every dollar counts and can be catastrophic without proper planning and foresight.
The Lightning Network helps alleviate these pressures with minimal transaction fees. On average, payments made by credit card amount to about 3% fee due to intermediary financial institutions. The Lightning Network opens up the possibility of process payments at a fraction of the cost using micropayment channels. While an entire customer base is unlikely to immediately transact through the Lightning Network, even transitioning 25% of credit card payments could significantly improve margins.
Benefit from constant innovation
Without going into superfluous details of how Lightning works behind the scenes, innovations materializing in the space remain frequent.
For example, IBEX payment works as a web application service that allows merchants to create an invoice on demand, generate a QR code for the buyer to scan with any Lightning wallet, and process payment via Lightning instantly. Traders can choose to receive payment based on the BTC/USD ratio designated by the user.
For businesses with point-of-sale (PoS) terminals, Strike expands Lightning Network compatibility for many while providing similar benefits to the IBEX Pay platform in terms of efficiency and cost effectiveness. And most of these services do not require monthly subscription fees.
Another benefit of using the Lightning Network is near-immediate fund settlement. Businesses no longer have to wait two to three business days for ACH payments/transfers to settle to access capital via “cash rails”. Intermediaries are removed with the use of the Lightning Network, allowing quick access to capital while limiting counterparty risk.
An integrated clientele
Although customer bases are highly dependent on the goods or services offered by a company, there are a large number of Bitcoin supporters who prefer and often seek out vendors who directly or indirectly operate in the Bitcoin environment.
Many bitcoin advocates use websites such as btcmap.org And satmap.app to find businesses that accept bitcoin. Since the Lightning Network is a layer built on top of the Bitcoin network, adopting it can provide you with an ever-growing embedded customer base that is hungry to contribute and share in the successes of businesses operating under the Bitcoin umbrella.
Limits and risks
Still, the relative youth of the Lightning Network means there are limitations and potential risks.
For example, IBEX Pay currently offers a maximum trade size of $2,500. Additionally, and as with any new technology, as the network gains traction, there are always potential risks of bugs and other vulnerabilities. The recent surge in popularity has helped alleviate concerns about this proof-of-concept, but without decades of data points to back up, there’s no guarantee problems won’t emerge. Finally, the current lack of regulatory clarity in the area of digital assets could potentially lead to further questions down the road.
That said, the Lightning Network offers companies a competitive advantage from a financial, operational and technological perspective, although there are some concerns due to the relative youth of the product in addition to existing limitations in current solutions. However, rather than sit idly by and suffer the margin pressures that continue to seep into the economy, it is worth taking action and adapting.
My recommendation for business owners is to test the implementation of this solution for at least a small segment of your business and build a sufficient sample to compare current checkout processes. What’s the worst case scenario here? You do not reap the benefits described here, but you are without collateral damage to your business. The best? You’re a frontrunner in a technology that aims to disrupt the payment processing space, while increasing margins and getting customer payments faster.
It is your decision.
This is a guest post by Matt Maraia. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.