The news is official: Binance is working to integrate Lightning Network for Bitcoin deposits and withdrawals.
However, LN will not be available on the exchange right away, because they say they still have a lot of technical work to do. They have already created some of their own nodes.
They have apparently been working on it concretely since May, and since a high level of security is required of them, they do well to take their time so as to avoid any kind of technical problems.
By now the Lightning Network works well, so much so that other crypto exchanges are already using it. Despite this, there are still not very many of them, and the fact that Binance is also about to integrate it will certainly give a strong boost to its use.
Binance: Lightning Network on exchanges
Lightning Network is very useful to users of crypto exchanges for two reasons.
The first is that it greatly reduces the cost of Bitcoin transactions. Those who move large amounts of money to and from exchanges have no problem paying even $30 fees on individual deposits or withdrawals, but for everyone else even the current $2 can be a deterrent.
LN reduces these castes to an infinitesimal, and therefore irrelevant, fraction, breaking down all possible barriers due to the high cost of Bitcoin transactions.
The second and perhaps even more important reason is that it makes transactions in BTC almost instantaneous.
Currently Bitcoin withdrawals and deposits to and from Binance can take up to hours before they are completed.
In contrast, with LN they could be executed almost immediately.
All of this makes holding Bitcoin on non-custodial wallets much cheaper and more efficient because it allows them to be moved quickly and cheaply to the exchange at any time.
For example, in May the crypto exchange Bitfinex reported that it had handled more than 11,000 transactions via LN in the past 30 days alone.
The slowness of Binance
Binance is usually very quick to implement innovations. However, this time, as CEO Changpeng CZ Zhao himself admitted, they have been particularly slow.
There could be a couple of reasons behind this abnormal slowness of the world’s largest exchange.
First, an integration like this requires something very close to absolute perfection. So it requires that at the technical level everything be done with extreme care, and speed is the enemy of care.
It is better if the exchange takes its time to do things right.
Also perhaps until now there was not a great demand from users to be able to use LN.
Not least because to be able to use LN on Binance it is necessary to have a wallet that supports LN, and not everyone has that yet.
However, lately there have been a lot of requests to be able to withdraw one’s funds from centralized exchanges in order to store them on non-custodial wallets, but in order to be able to do this smoothly, fast and cheap transactions are required.
Thus this need also brings with it an implicit demand to be able to use Lightning Network to deposit or withdraw BTC on exchanges.
It is worth noting that there are in fact very few exchanges that have integrated LN and have users who are using it. In addition to Bitfinex, also Kraken has done it, but among the large exchanges basically only these two are known to have such features.
The Lightning Network
Truth be told, the highest peak of existing LN channels was in February last year, when there were more than 87,000. Now they are down to 75,000, and they have been dropping since January.
Instead, nodes are increasing slightly, even though the peak was still in January 2022.
Instead, what is steadily increasing is the capacity of the LN network, which has risen above 5,400 BTC and close to all-time highs.
LN channels are the equivalent of wallets, while nodes are the machines that handle transactions. Capacity is the total number of Bitcoin that can be used within the network.
Specifically, the average capacity per channel is at an all-time high, rising to nearly 7.3 million sat (satoshi).
A sat is the smallest unit into which a Bitcoin is fractionable, and is equal to one hundred millionth of a BTC. So 7.3 million sats corresponds to 0.073 BTC, or just over $1,900.
This last figure gives a good idea of how currently LN is still not widely used by those who own a few satoshi, but primarily by those who own several thousand dollars in Bitcoin.