Xapo Bank announced that it has joined the Lightning Network and formed a partnership with Lightspark. This collaboration will make the organization the first private bank to accept Lightning payments with a full license.
According to a press releaseXapo Bank users can now pay directly for small purchases up to $100 at any vendor accepting Lightning payments, without incurring exorbitant transaction fees or waiting time for long blockchain confirmations.
Xapo Bank Bridge The Gap Using Lightning Network
Xapo aims for integration to bridge the gap between traditional finance and cryptocurrency. The platform currently offers an annual interest rate of 4.1% in US dollars on accounts with a $100,000 deposit guarantee, and will eventually offer up to 1% in Bitcoin.
Image: Medium
Seamus Rocca, CEO of Xapo Bank, said of the partnership:
“By integrating with the hyper-efficient Lightning Network, we are the first bank in the world to streamline this process and allow our members to pay for small purchases with Bitcoin without having to convert to USD first.”
How Lightning Works
The Lightning Network is a second layer scaling solution for Bitcoin and other cryptocurrencies. It is designed to solve Bitcoin’s scalability problem, which is limited in the number of transactions that can be processed per second. This allows transactions to be faster, cheaper, and more private than on-chain transactions.
Image: Blockgeeks
The Lightning Network is built on top of the Bitcoin blockchain and uses smart contracts to create payment channels between users. This payment channel allows users to transact without the need for each transaction to be recorded on the blockchain. However, only channel opening and closing transactions are recorded in the blockchain.
To use the Lightning Network, two users must open a payment channel between them by creating a multi-signature transaction on the blockchain. Once the channel is open, they can transact with each other by exchanging off-chain incoming transactions. Each transaction updates the channel balance, and the final balance is recorded in the blockchain when the channel is closed.
Bank in full
Xapo has received a banking license, primary membership with Visa and Mastercard, and members of SWIFT since starting the process in 2019. This means that companies can interact directly with correspondent banks, as opposed to going through payment businesses or other parties, and have access to money market accounts.
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Rocca emphasized the importance of the newly created collaboration due to the regulatory pressures currently being exerted on cryptocurrency exchanges, yield products, and stablecoins.
-Featured image from Coin Culture