How Bitcoin Fees Can Drastically Decrease With SegWit and Lightning

By August 15, 2017Bitcoin Business
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How Bitcoin Fees Can Drastically Decrease With SegWit and Lightning

Earlier this week, bitcoin developer Jack Mallers introduced Zap, a Lightning-enabled wallet which enables users to send bitcoin micropayments, or extremely small bitcoin transactions with low fees.

In concept, the Lightning Network allows users to create a batch of microtransactions, combine them, and send one large transaction to the bitcoin blockchain. By processing many small transactions outside of the main bitcoin blockchain, Lightning creates an infrastructure wherein users and businesses can engage in a series of micropayments that are not possible with the main bitcoin blockchain.

The key to efficiently and securely running the Lightning network is the Bitcoin Core development team’s transaction malleability fix and scaling solution Segregated Witness (SegWit). Upon the activation of SegWit, which is expected to be completed by August 22, the Lightning Network can be securely launched in the bitcoin network. When Lightning is launched, user-friendly wallets such as Zap will allow users and businesses to carry out microtransactions and open doors for opportunities that are not possible with the main bitcoin blockchain and its relatively high transaction fees.

Lightning is a two-layer solution which has been highly anticipated by the bitcoin and cryptocurrency community since 2016. The launch of Lightning and the Lightning Network-based platforms such as Zap has been prolonged due to the delay in the activation of SegWit but upon its activation on August 22, Lightning-based bitcoin micropayments wallets like Zap will be able to move out of the bitcoin testnet and serve actual bitcoin users.

Because the activation of SegWit and the launch of Lightning have been highly anticipated by both the community and the industry, Mallers revealed that Zap received many offers from investors and potential business partners. However, throughout the development and launch of its minimum viable product, Mallers revealed that he refused all of the offers and plans to reject future offers to prevent a conflict in interest between users and profit-demanding investors.

“I have received some attention from investors and potential business partners interested in Zap. I have respectfully declined all offers. I do not want this for Zap. I am most interested in helping people and companies use the Lightning Network to solve their problems while pushing bitcoin’s overall success in the right direction. I think it would be great if the community had an open source LN UI that has no other incentive than simply benefiting the users,” said Mallers.

More importantly, Mallers noted that misalignment of vision between the Zap user base and potential investors could lead to the creation of an inefficient micropayments wallet, especially if investors demand financial incentives and high profit margins on a product that is solely focused on establishing a cheaper and faster way to transact using bitcoin.

“This creates an unhealthy relationship between their financial incentives and the users actually using their product(s) — more often than not resulting in decisions made against the best interest of users and their experience,” Mallers noted.

The launch of user-friendly Lightning-based bitcoin micropayments wallets like Zap that are solely focused on providing cheaper and more secure methods of transacting bitcoin without complying with unrealistic demands from early-stage and venture capital investors is expected to drastically increase the scalability of bitcoin by decreasing the transaction fees of bitcoin payments.

Joseph is a web developer and designer, writer and a passionate musician who loves to travel often. He’s worked as a researcher for a number of venture capital firms and as a freelancer designer for resorts and corporations in Korea and the Philippines. Joseph will be covering new technologies, startups, technical analysis and breaking news in the bitcoin industry.

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