Xapo Bank becomes the first lender to enable near-instant Bitcoin payments
Xapo Bank announced that it has integrated 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 instantly for smaller purchases up to $100 at any provider that accepts Lightning payments, without incurring exorbitant transaction fees or long wait times for blockchain confirmations.
Xapo Bank bridges the gap by using the Lightning Network
Xapo intends the integration to bridge the gap between traditional finance and cryptocurrency. The platform currently offers an annual interest rate of 4.1% on US dollars on accounts with a deposit guarantee of $100,000, and will eventually offer up to 1% on 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-tier scaling solution for Bitcoin and other cryptocurrencies. It is designed to solve the scalability problems of Bitcoin, which is limited in the number of transactions it can process per second. It allows for faster, cheaper and more private transactions than transactions in the chain.
Image: Blockgeeks
The Lightning Network is built on top of the Bitcoin blockchain and uses smart contracts to create payment channels between users. These payment channels allow users to transact without the need for each transaction to be recorded on the blockchain. Instead, only the opening and closing transactions of the channel are recorded on 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 trade with each other by exchanging signed transactions off-chain. Each transaction updates the balances of the channel, and the final balances are recorded on the blockchain when the channel is closed.
A full-fledged bank
Xapo has received a banking license, primary membership with Visa and Mastercard, and SWIFT membership since the initiation of the process in 2019. This means that the company can interact directly with correspondent banks, as opposed to going through payment institutions or other parties, and has access to money market accounts.
Crypto total market cap at $998 billion on the weekend chart | Chart: TradingView.com
Rocca emphasized the importance of the newly formed collaboration in light of the regulatory pressures currently being exerted on cryptocurrency exchanges, yield-generating products and stablecoins.
– Featured image from Coin Culture
