The US Fed Is Exploring the Lightning Network

by in Cryptocurrency News

Lightning Network Fed

The Federal Reserve of the US has been exploring Bitcoin. The Cleveland Fed released a study titled "The Lightning Network: Turning Bitcoin into Money" which investigates LN's role for BTC payments.

Related: Lightning Network Capacity Hit a New All-Time High

Lightening is a secondary transaction layer launched in March 2018, which operates outside the Bitcoin network to help it handle a large number of operations with lower costs.

Based on observations, the study concluded that the usage of the Lightning Network is related with lower mempool congestion in BTC and with reduced fees. Mempool is the space where unconfirmed transactions are put waiting for being included in a block.

The Fed says off-chain netting benefits of LN can help BTC to scale and increase its efficiency as a means of payment. According to research, LN is centralized as 10% of the nodes control 80% of funds on the network. The Fed says centralization of LN doesn't appear to make it much more efficient, though it may increase the proportion of low fee transactions.