The Lightning Ecosystem

This blog post is a modified extract from the report “The State of Lightning.” Powered by OpenNode - Supported by Lightning Labs The Lightning Ecosystem consists of a wide array of companies, ranging from the companies developing the base codes called implementations to traditional businesses accepting Lightning payments. In the following sections, we will take a closer look at the different subcategories of companies and explain their role in the Lightning ecosystem. The Lightning ecosystem is presented below, with a range of companies as illustrations. Overview of the Lightning Ecosystem with a selection of companies and projects as illustrations. Technical foundation The technical foundation is listed at the top of our ecosystem, and this is not by coincidence. At the very core of the Lightning Network ecosystem lays a technical foundation of code implementations, which everything else in the Lightning network builds off. The key ideas behind the Lightning Network were first described in a draft white paper authored by Joseph Poon and Thaddeus Dryja in 2015, but it would take three years to translate the concept into a working code. There is no specific Lightning Network company; it is an open protocol. However, there are three key developing teams behind the interoperative implementations of the Lightning Network technology: San Francisco-based Lightning Labs and Blockstream and Paris-based ACINQ. The different implementations maintain interoperability by conforming to the Lightning Network specifications, called BOLT (Basis of Lightning Technology). The Lightning Network specification is maintained and developed through a community effort. For the Lightning Network to function, however technically sound you are, some more pieces than the implementations must be in place. Put simply, you would need the network part of the Lightning Network to be in place. The key ingredient is a well-connected network with efficient payment paths. Routing hubs, node management, and liquidity solutions all play a vital role in maintaining an efficient and well-connected network. Payment solutions and savings – making the Lightning Network accessible A selection of companies developing payment solutions and savings. The technical foundation enables others to build services on the Lightning Network. To make bitcoin widely adopted as a medium of exchange, companies develop easier-to-use solutions for holding, spending, and receiving bitcoin on the Lightning Network. Users interact with Lightning through wallets. You can run your own wallet without relying on the services of others, but this is a challenging technical task. Most users avoid this and choose one or more of the available wallet solutions. The architecture of these wallets can be set up in different ways. The different wallets serve various needs. Some focus on ease of access, while others prioritize the self-sovereignty of the holders. Merchant payment solutions enable Lightning integration for merchants worldwide. This will often include providing the merchant with a wallet, but businesses need additional features to comply with tax rules, legislative regulation, etc. Some merchant payment solutions enable instant conversion of BTC to fiat and vice versa. Other focus on ease of access to advanced API systems, offering merchants optionality to customize the service for their needs. These payment processors strive to make it easier for merchants to start accepting bitcoin payments or utilize the instant payment feature enabled by Lightning to facilitate fast settlement when purchasing goods or services. Commerce - Something to spend your sats on A selection of commercial services available through Lightning payments. Great wallets and payment solutions are of little use if there is no place to spend or use your satoshis. Businesses accepting Lightning payments are therefore essential for the Lightning Network's success. The offerings available through Lightning payments are expanding rapidly, and the above picture could become ancient soon. Historically though, there have been some types of services dominating on the Lightning Network. Spending-wise, many have used the Lightning Network for accessing trading and gambling services cost-efficiently with smaller amounts of money. Gift cards have also been a popular way to translate your satoshis to real-life utility with the current merchant system generally not accepting Lightning payments. Various rewards and earnings programs have accounted for much of the payment traffic in terms of the number of transactions. Contrary to trading and gift cards, these payments are incoming rather than outgoing for the users. These types of services utilize micropayments to reward their users for some action. Gaming rewards have been especially popular, where the players get rewarded in satoshis for simply playing a game. With bitcoin adoption on the rise and more traditional businesses incorporating Lightning payments, the dominating use cases for Lightning payments will evolve in tandem. Large multinational corporations like McDonald’s and Starbucks accepting Lightning payments in El Salvador serve as fitting examples. It will be highly interesting to follow the evolution going forward. This blog post is a modified extract from the report “The State of Lightning.” To read the full report, click the link below.