Xapo Bank recently announced that it has begun using the Lightning Network and has entered into a relationship with Lightspark.
Because of this agreement, the organization will become the first private bank to be licensed to take Lightning payments.
Users of Xapo Bank now have the ability, as stated (1) in a press release, to make immediate payments for low-value transactions of up to $100 at any retailer that accepts Lightning payments without having to worry about expensive transaction fees or lengthy wait times required for blockchain confirmation.
Lightening Network Played a Pivotal Role
Xapo anticipates that the integration will serve to close the gap that exists between conventional banking and cryptocurrencies.
At the moment, the platform provides an annual interest rate of 4.1% on United States dollars in wallets with a reserve assurance of $100,000. In the future, it will provide an interest rate of up to 1% on Bitcoin.
About the agreement, Xapo Bank CEO Seamus Rocca had the following to say:
“We have become the first global bank to expedite this procedure and let our members pay for modest items with Bitcoin without needing to convert to USD first because we have integrated with the hyper-efficient Lightning Network,”
Lightening Network Operation
Cryptocurrencies such as Bitcoin could benefit from a second-layer scalability solution known as the Lightning Network.
It was developed in order to solve Bitcoin’s scalability problems, which stem from the fact that the cryptocurrency is restricted in the number of transactions it can execute in a single second. It enables transactions that are cheaper, quicker, and more private than those that take place on the chain itself.
The Lightning Network is an extension of the Bitcoin blockchain that enables users to establish payment channels with one another through the use of smart contracts. Users are able to do business via these payment channels, which eliminates the requirement that each payment is saved to the blockchain.
Instead, the blockchain records only the interactions that occur at the start and end of the channel.
In order to make advantage of the Lightning Network, it is necessary for at least two users to first establish a payment method between themselves by means of a blockchain transaction requiring multiple signatures.
After the channel has been opened, they will be able to transact with one another off-chain by exchanging transactions that have been signed.
Each transaction will update the balances of the channel, and when the channel is closed, the final balances will be posted on the blockchain.
Finally, Xapo a Proper Bank
Since Xapo began the application process in 2019, it has successfully (2) obtained a business license, primary affiliation with both Visa and Mastercard, and SWIFT certification.
This indicates that the corporation can access money market accounts and can engage with correspondent banks, as compared to having to go through remittance companies or other third parties.
Given the regulatory pressures presently being applied to crypto exchange, yield-generating products, and stablecoins, Rocca emphasized the relevance of the recently created collaboration that has just come into existence.
