Binance Faces Challenges with Bitcoin Lightning Network Implementation - COINTURK NEWS
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Binance Faces Challenges with Bitcoin Lightning Network Implementation

2:05 am (49 days ago)
August 17, 2023

Binance, the leading cryptocurrency exchange with the highest trading volume for Bitcoin (BTC), continues to serve as the world’s largest crypto exchange. The company approved the Bitcoin Lightning Network application on June 20th, but two months later, Binance’s activities concerning Bitcoin’s second layer still seem far behind its competitors.

What’s the Trouble with Binance?

Lightning Network (LN) is a Layer-2 solution that enables faster and lower-cost transactions on Bitcoin’s base layer. It allows two parties to open a bi-directional channel by depositing BTC into a common wallet known as a multi-sig wallet. The balances of both users are updated based on all transactions made using this channel, and these balances can be used on Bitcoin’s first layer.

According to data obtained from Amboss Space on August 16th, Binance’s first Lightning Network channel was opened 62 days ago on June 16th. However, the latest of the six channels has been active for 30 days, indicating that no new LN channels have been created since then.

The total capacity available for Binance Node, which is 34 BTC (3.4 billion sat), has remained the same since at least July 24th. The capacity measures the amount of Bitcoin deposited into each of the six channels to be used during deposit and withdrawal transactions by users.

Binance’s Competitors: Bitfinex and Kraken

By comparison, Bitfinex, the cryptocurrency exchange that pioneered Lightning Network usage, has two Bitcoin LN nodes, namely ‘bfx-lnd0’ and ‘bfx-lnd1’. As of the time of writing, they have a capacity of over 404 BTC among 929 channels and a capacity of 480 BTC among 915 channels, respectively. The newest channel created by ‘bfx-lnd0’ is six hours old, while the latest channel for ‘bfx-ln1’ was created one hour before the time of writing.

A similar situation can be seen in the second cryptocurrency exchange in terms of Lightning Network usage: Kraken. Kraken has a single node with a capacity of over 324 BTC among 1,509 channels, and the latest channel was created two hours prior to the time of writing.

Is Binance Using Bitcoin Lightning Network?

Within the past 24 hours, Binance has recorded a trading volume of over $837 million in both BTC/USDT and BTC/TUSD pairs, making it the leading exchange in terms of Bitcoin volume in the market. Kraken has a trading volume of less than $40 million, while Bitfinex has a trading volume of less than $25 million for both BTC/USD pairs during the same period.

Considering all these factors, even if Binance is using Bitcoin’s second layer, the data shows that its usage is at lower levels than Lightning Network enthusiasts who have been waiting to deposit and withdraw BTC values more efficiently on the leading crypto exchange.

Following the publication of this news, experts reported that Binance’s Bitcoin Lightning Network application is operational, but individual users cannot directly connect to the exchange through a channel. This means that they need to use intermediary nodes to route their deposit/withdrawal transactions.

Amboss account on X explained:

Kraken publishes the node connection details displayed in the address field. This enables the opening of new channels with Kraken. Binance does not publish node connection details, so general users cannot directly open a channel with Binance.

This statement was made after Vista Nodes (@LN_Vista) revealed that they use Kraken’s node to route Bitcoin transactions through Binance’s node.

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