Lightning Network settles inaugural bitcoin transaction | finder.com

Lightning Network settles inaugural bitcoin transaction

Peter Terlato 22 January 2018 NEWS

A Reddit user reportedly bought a new VPN router and paid for the purchase using the off-chain solution.

The Lightning Network, which offers a potential solution to bitcoin’s scalability issues, has reportedly completed its first ever, real-world transaction, according to a recent post on online discussion forum Reddit.

On January 20 Reddit user btc_throwaway1337 submitted a post outlining the details of their latest online purchase, a AR300M VPN Router, which he/she acquired using the Lightning Network’s mainnet blockchain.

The Reddit user revealed that the transaction was completed on January 14, after spotting a tweet by Virtual Private Network (VPN) provider TorGuard, explaining they were accepting Lightning Network bitcoin payments.

The buyer described themselves as an “average BTC enthusiast” who had a bit of extra time last weekend.

“I inquired as to purchasing more than just a monthly subscription, their staff gave me Lightning Network (LN) peering information, I opened a channel, received an invoice, and here we are,” the Redditor said.

“It was all quick, easy, painless, and most importantly: instantaneous and fee-free!”

Additionally, because TorGuard had LN channels open with vendors and users, they were able to use this same channel to route payments to and from others, approximately 8-10 times, and even tipped someone in Satoshi.

However, there are no guarantees that the Lightning Network service will work efficiently every time. TorGuard tweeted a disclaimer amendment to its original post, offering to cover any loss of funds via LN payments.

How does it work?

The Lightning Network is a decentralized system which utilizes smart contracts in the blockchain to enable instant payments across a large group. This network is capable of millions to billions of transactions per second. This speed and scalability is possible because the Lightning Network doesn’t create on-blockchain transactions for individual payments. However, the smart contracts can be enforced on-blockchain.

Global finance giant Visa does not consider cryptocurrencies, such as bitcoin, an acceptable form of payment. Earlier this year, a number of prepaid crypto debit card providers had their services suspended by Visa.

Last week, the US Securities and Exchange Commission (SEC) advised that cryptocurrencies and related products pose “significant investor protection issues” and cannot be offered as exchange-traded funds (ETFs).

A sharp increase in fees and lengthy transaction times have rendered bitcoin payment purchases impractical. If the Lightning Network is successful in processing micropayment transactions, it may benefit cryptocurrencies.

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