Kraken customers can now instantly deposit and withdraw bitcoin with nearly no fees through the Lightning Network.
Cryptocurrency exchange Kraken now supports Bitcoin’s Lightning Network for inexpensive and instant customer deposits and withdrawals of BTC, the company said in a statement sent to Bitcoin Magazine.
“Adoption is going to come from people who have fiat in their bank account, and they need to get it into Bitcoin,” Pierre Rochard, Bitcoin product manager at Kraken, told Bitcoin Magazine. “Kraken is providing an excellent venue for them to do that, and then they can top up their mobile Lightning wallet and use it as a medium of exchange. That’s clearly the next step in terms of Bitcoin’s evolution.”
Kraken joined the Lightning Network with its own Lightning node. The company said all of its clients can now use the new integration, which allows deposits and withdrawals of up to 0.1 BTC, or 10 million satoshis, per transfer.
“Lightning is a lot more efficient than on-chain Bitcoin while also still relying on on-chain Bitcoin’s security, so it really is the best of both worlds,” Rochard said.
Lightning enables cheap and fast bitcoin transactions by leveraging smart contracts to abstract small and frequent payments away from the Bitcoin network base layer. That abstraction occurs in the form of payment channels, in which users lock up bitcoin on-chain by creating 2-of-2 multisig addresses, which they can then use to transfer funds to one another off-chain.
“With Lightning, you can send a payment off-chain that is much more energy efficient, not only because you’re not adding the miner fees, and thus the amount of electricity consumption by miners, but also because that payment only has to be stored and shared by the two parties in that channel,” Rochard said.
Lightning hence scales the Bitcoin blockchain as a second layer and empowers BTC to be better used as a medium of exchange by establishing an overlay network of payment channels indirectly connected with each other that can theoretically perform millions of transactions per second as bitcoin is routed across channels from sender to recipient.
Kraken leveraged Lightning Labs’ node implementation, LND, due to the API interface it exposes and the extensive developer documentation the project makes available, Rochard said.
“It has been a really great experience because they do have a fully featured API and they are one of the oldest implementations of the Lightning protocol,” Rochard said. “They have the largest user base and we have a lot of people on the network that have lots of experience with LND. So it has proven to be easy to use and very reliable as well.”
