With every victory comes setbacks, and Bitcoin is no exception. The digital currency’s massive rise in popularity has presented some limitations surrounding scalability.
Let’s look at the specifics. Legacy Bitcoin blockchains are limited to 1MB in size, and new blocks are added to the chain approximately every ten minutes. Segregated Witness (SegWit), a technique that splits up Bitcoin transactions into two segments and can increase the blockchain size up to 4MB, has expedited the process, supporting up to 16-28 transactions per second. While this is a boost compared to the legacy blockchain, (which is limited to 4-7 transactions per second), many argue that the improvement, in the scheme of things, is minimal. After all, major credit card companies can process tens of thousands of transactions per second.
Ultimately, Bitcoin’s scalability issue and high transaction fees are preventing its widespread adoption at the enterprise level. But the Lightning Network, which is expected to launch in the near future, has the potential to disrupt all of that. Let’s take a closer look.
The Lightning Network
The Lightning Network is a decentralized network that uses smart contract functionality in order to enable instant payments across a network of participants.
Unlike legacy and SegWit Bitcoin transactions, in which transactions are verified and added onto the blockchain, the Lightning Network is an “off-chain” solution in which a system of smart contracts is built on top of the Bitcoin blockchain. Transactions and scripts are parsable, and can be enforced on the blockchain if needed, but otherwise are not bound by blockchain scalability limitations.
Ultimately, the Lightning Network enables lightning-fast confirmation times that can process millions to billions of transactions per second across the network. Once it officially goes live, it has the potential to completely disrupt the enterprise landscape as we know it.
Implications at the Enterprise Level
The Lightning Network’s solutions surrounding scalability and transaction times will make both bitcoin and blockchain technology more applicable at the enterprise level. Many high-profile companies, including Starbucks, are already keeping a close eye on the blockchain and its potential for consumer application. In a recent earnings call, Starbucks Executive Chairman Howard Schultz stated that the coffee giant is in a “very unique position to take advantage of what the blockchain technology will provide.”
Schultz, who predicted a “seismic change” in the retail space due to Amazon and ecommerce, prides Starbucks on its “entrepreneurial DNA” and “curiosity to see around corners and make big bets”, citing the company’s launch of its mobile ordering system in 2015 as an example.
The company, which opened a mobile-only store in Seattle last year, has already begun testing the waters with cashless purchases. While Schultz did not state that Starbucks would be investing in or creating a digital currency at this time, he did note that digital currencies could work well with the mobile payment digital platform they created.
Ultimately, Starbucks is just one major company of many that are evaluating blockchain technology, and digital currencies, in regards to suitability for enterprise adoption. And while the Lightning Network’s launch date is still up in the air, it is this type of innovation, with its scalability, lightning-fast transaction times, and exceptionally low fees that could catapult digital currencies to new heights, transforming and streamlining business transactions in a way that we have never seen before.