How will the Lightning Network change bitcoin?
Although it might be too soon to know, it’s a question everyone’s seemingly asking following tests that take the long-anticipated tech closer to launch. The network’s garnered its fair share of excitement over the past few months, so much so that individuals and businesses are looking to take advantage of its cheap, fast payments.
Out of this comes a small Japanese startup called Nayuta, which has been experimenting with adding Lightning payments to the Internet of Things, where everything from door locks to BMWs are connected to the internet to increase efficiency.
With this experimentation, Nayuta is exploring a couple of implications of the tech.
First, the startup believes Lightning could bring value to the Internet of Things in a way that old payment systems and bitcoin couldn’t because they’re both simply too slow.
Second, it’s one of the first earnest businesses working on a product built on Lightning, showing that the off-chain network might actually have a business proposition, even this early on.
Lightning + IoT
Nayuta started off in 2015 by adding normal bitcoin transactions to the Internet of Things in a range of prototypes.
But, like others using bitcoin, they were disappointed by its limitations. They found instant “zero-confirmation” transactions weren’t secure enough and that 10 minutes was too long to wait for a transaction to be secure.
Then Lightning came along, the idea being it’s possible to actually make more secure instant payments (though there are still some caveats). Since it’s faster than traditional payments, Nayuta decided it was the “only” solution to Internet of Thing’s desire for payments that are as fast as the internet connections that fuel them.
One recently popular Internet of Things product is the so-called “SmartLock.” Rather than requiring the metal keys we’re all used to (just one more thing to remember), the rightful owner can use their smartphone to unlock it.
Showing the company’s switch in gears toward Lightning, they released a proof of concept of such a lock that opens only once it’s sent a Lightning payment.
Neither of these things are particularly useful, at least in the current form (why would anyone want to require a payment to unlock something?). But, as Nayuta sees it, these proof-of-concepts demonstrate how real-time payments can for Internet of Things more broadly, one of millions examples being a sensor gathering data about an ocean, and a researcher directly paying the sensor a small fee over the Internet to get that information.
The test payment was made between Nayuta’s homegrown Lightning software implementation, dubbed “Thunderbird”, and c-Lightning, an software implementation by bitcoin infrastructure startup Blockstream.
In that way, not only does Nayuta “open the door” to interesting Lightning use cases, it also diversifies the number of Lightning software implementations there are, which the company thinks is important, because, it believes, some features are missing from current Lightning implementations.
“We do not think Lightning is ready,” Nayuta CEO Kenichi Kurimoto told CoinDesk.
Lighting businesses emerge
All this feeds into the second interesting thing Nayuta is doing: It’s one of the first companies to build a business around Lightning, showing that perhaps Lightning has a business proposition.
The handful of Lightning startups out there so far, such as Lightning Labs and Paris-based ACINQ are focused on the low-level technology, not building a product that their company around a particular application of Lightning.
Though, Kurimoto admitted they’re not really being sure what to make out of all the prototypes they’ve launched over the last few years.
“We did not decide the product future. Currently we’re concentrating on development of the [Lightning Network] software,” Kurimoto said, adding that one company that they can’t disclose due to NDAA using their software so far.
Even so, Nayuta sees business promise in this area. Internet of Things payments have been floated for a long time, with even the likes giant payment processor Visa launching payment solutions in this area.
But, to Kurimoto, the current financial infrastructure is behind the times.
If refrigerators want to pay grocery stores and users want to use micropayments to pay for video and so forth, payments often need to be really small and fast. The current financial infrastructure wouldn’t be able to handle it.
“The Lightning Network is the only solution for real-time transactions.”
Matchheads via Shutterstock
The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at firstname.lastname@example.org.