Blockchain data platform Chainalysis will add support for the Bitcoin’s Lightning Network.
The Lightening Network is a second layer protocol built on top of the bitcoin blockchain designed to enable fast, low-cost transactions.
The company said that the Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges, using Chainalysis KYT (Know Your Transaction) for real-time transaction monitoring will now be able to compliantly allow Bitcoin transactions through a Lightning node.
The Lightning Network
The Lightning Network is a decentralized system for instant, high-volume micropayments that does not require the delegation of custody of funds to third parties. Lightning enables users to more efficiently use Bitcoin – the world’s most widely used and valuable virtual asset – for smaller payments such as tips and remittances instantaneously and scalably.
Lightning Network Growth Exploding
Lightning Network is growing rapidly as the amount of Bitcoin locked in the Lightning Network — meaning the amount being used to fund Lightning channels — has grown significantly throughout 2021.
Although the Lightning Network launched in 2018, governments and corporations – including El Salvador and Twitter – have recently adopted Lightning solutions for payments, driving adoption to record highs.
According to Chainalysis data, the lightening network witnessed a rise of over 669% percent in its capacity in 2021. Almost 3,600 BTC worth over $205 million is locked in public Lightning Network channels as of December 1, 2021, up from 468 BTC worth roughly $4.8 million on January 1, 2021.
Pratima Arora, Chief Product Officer, Chainalysis, said:
“Chainalysis exists to build trust in cryptocurrency in order to promote more financial freedom with less risk. The Lightning Network solves many of the challenges that prevent the Bitcoin protocol from being used for micropayments and other transaction types that bolster financial inclusion. By enabling our customers to compliantly support Lightning transactions, we hope to grow the network’s popularity and help it scale.”
For the first time, VASPs can now offer support for Lightning transactions aligned with global regulatory best practices. Chainalysis KYT will support pre-screening for Lightning withdrawals and behavioral alerts.
Reio Piller, Co-founder and CTO of Yolo Group, commented:
“As the provider of the world’s most popular blockchain-based gaming and betting platforms, much of our business depends on our ability to scale our users’ cryptocurrency payments. Chainalysis support of the Lightning Network gives us the compliance tools we need to safely leverage Lightning to grow our business and provide a better payments user experience for our customers.”
Support for the Lightning Network will become available in February for Chainalysis KYT customers.