[Daily] Just like lightning

Good morning! Welcome to The Daily Moon. It’s a new week but it still feels like 2022. Stories about Terra don’t stop. It seems Do Kwon, who is in prison in Montenegro, paid a law firm $7 million days before his firm collapsed. The suspicion is that he saw the crash coming and made moves to protect himself. This law firm's officials have flown down to Montenegro to set him free. So far, the country has ignored all extradition requests.

Moving on, today we talk about the Bitcoin Lightning Network’s expansion and the demise of play-to-earn.

As of Sunday, 12:45PM IST

The markets showed mixed trends. Bitcoin saw some selling from whales. Ethereum stayed bullish after the Shanghai upgrade. S&P 500 and Nasdaq fell on losses in technology stocks. Back home, Sensex and Nifty were closed for Ambedkar Jayanti.

Lightning Goes Mainstream

Seven years ago, two developers, Joseph Poon and Tadge Dryja, realised that Bitcoin needed to get faster. The blockchain was packed, transaction fees were rising, meanwhile, settlement speed was slowing. The duo introduced Lightning Network, which was to be a Layer-2 (L2) solution built on Bitcoin. Its beta launch in 2018 took the market by surprise. Now in 2023, it is going mainstream.

Entrepreneur David Marcus’s Bitcoin technology firm Lightspark has started an enterprise platform for Lightning Network. This will be an entry point for businesses into Bitcoin’s L2 network. Jack Dorsey-backed Spiral has a similar plan..

Lightning’s public capacity, the amount of BTC locked in payment channels, even hit an all-time high of 5,600 BTC. The payment channel has grown 60% within a year.

A quick primer Before we get any further, here’s a glimpse of how Bitcoin’s Lightning Network works:

• It is a peer-to-peer payment channel created between two nodes.

• Nodes can be run by anyone using the network.

• First, users need to lock some BTC into the payment channel.

• The locked BTC can be spent across the network till the channel is closed.

• Senders and receivers transact using alphanumeric codes.

Say Mike wants to pay for his coffee using BTC but wants instant transactions at low costs: he first sends some BTC to a multisig (or multi signature) wallet and opens a Lightning Network payment channel. Every time Mike makes a transaction, it’s reflected in the wallet. He and the coffee shop can mutually decide to close the payment channel when needed.

Source: CoinTelegraph

What makes it popular?Amazon, McDonald’s, Starbucks, Walmart, and Uber are just some merchants that accept Bitcoin payments via the Lightning Network.

You may wonder, why not just use the mainnet? The Bitcoin blockchain is expensive and slow. It can process ~7 transactions per second and charges an average transaction fee of $2.36.

In contrast, the Lightning Network can process up to 1 million transactions per second and charges ~$0.02 as the base fee. That’s even lower than some of the mainstream card companies that incur between ~$1.3-$2.7 for a $100 transaction. Speaking of TradFi, one person even tested Lightning’s speed versus regular card payments:

So, it is faster and decentralised. But on the flip side, running nodes on the Lightning Network require a degree of technical knowledge.

What’s next for Lightning?Cryptopreneurs have planned to integrate the Lightning Network into their products and improve accessibility. Another innovation that is WIP is where developers use hierarchical channels to scale the Lightning Network. This will involve data being taken off-chain, resized, and brought on-chain. It’ll ensure that the core network isn’t clogged.

With healthy competition among developers and institutions to make the Lightning Network convenient to use, the ultimate winners will be BTC users.

Play To Earn Is Dying

Play to earn gaming is dying. There’s no way around that and it’s not just the low user numbers or the downturn in price that is to blame. Gamers are just tired of it, it feels like a pandemic fad that seems to be running out of steam now.

Gaming companies are trying to find ways to stay alive. One of the alternatives is a token that can be returned by the user back to the ecosystem instead of a singular use case — playing them. But that still seems like the loop these companies are trying to create won’t have enough momentum to get the users back.

Companies are also trying to build metaverses so users can find varied use cases for the tokens they earn. Even though it is an interesting idea, it will only see a handful succeed.

And that’s it for today. If this email was forwarded to you, please consider subscribing. It’s free. We’ll never show you an ad or charge you for this. We swear.

To sweeten the deal, here's an offer you cannot refuse! You can refer this newsletter to your friends, family and any amazing community. The top referrer every month wins a guidebook to upcoming potential airdrops and exclusive premier content! Click below to share your unique referral link!

Who are we? This newsletter’s ambition is to educate (and to entertain). The world of money is changing everyday and we want to help you decode what’s happening in the world of crypto, public markets in the US and India.