- Binance unveils plans to integrate Lightning Network for Bitcoin withdrawals.
- The exchange paused Bitcoin withdrawals earlier, causing concerns.
- Lightning Network helps scale the Bitcoin blockchain.
Binance, the largest crypto exchange in the world, is grappling with changes happening on the Bitcoin network. Amid mounting issues, the exchange had to pause Bitcoin withdrawals and raise withdrawal fees.
Due to other controversies surrounding Binance, the decision caused concern among users. However, Binance has since unveiled plans to use Lightning Network to solve all these problems.
Binance Pauses Bitcoin Withdrawals, Unveils Lightning Plans
The revelation of Binance’s plans to integrate the Lightning Network came amid a crisis for the exchange.
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On Monday, May 8, Binance paused Bitcoin withdrawals for the second time in 12 hours, causing considerable concern among its users. At the same time, the exchange also significantly increased its fees for Bitcoin withdrawals.
Following the decision, some users questioned whether Binance was in trouble and compared the issue to that of FTX. However, the exchange offered a different explanation for the problems: a steep rise in Bitcoin network transaction fees.
On Sunday, April 7, the average transaction fee on Bitcoin’s network surged to a staggering $19.21.
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This uptick in fees and network congestion coincides with a surge in BRC-20 tokens and inscriptions through Ordinals. This new technology enables users to mint NFT-like assets on the Bitcoin blockchain and trade fungible BRC-20 tokens.
There is little Binance can do to tackle the congestion issue on Bitcoin’s blockchain. However, Binance can use a level 2 scaling solution like the Lightning Network to enable lower fees for user withdrawals.
What Is the Lightning Network?
The Lightning Network is a second-layer solution that aims to resolve Bitcoin’s scalability and high transaction fee issues. The network enables off-chain payment channels between users, without having to record every transaction on the main blockchain.
Since Lightning Network transactions are off-chain, they do not require miner fees or compete for block space. This leads to significantly lower transaction fees compared to on-chain transactions.
On the Flipside
- Other exchanges, like OKX, already offer withdrawals using the Lightning Network.
- Bitcoin’s network congestion issues are similar to those that Ethereum faced. In 2018, the NFT game CryptoKitties caused major congestion for the Ethereum network.
Why You Should Care
Binance’s issues with Bitcoin withdrawals highlight the seriousness of Bitcoin’s congestion. With the rise of the ordinals, Bitcoin could be facing similar problems that plagued Ethereum.Â
FAQs
Binance does not use the Bitcoin Lightning Network. However, the exchange announced plans to integrate the Lightning Network to improve transaction times and reduce fees for Bitcoin withdrawals.
The Lightning Network is not a cryptocurrency that users can buy. It is a second-layer protocol built on the Bitcoin network to facilitate faster and cheaper transactions. However, users can use the Lightning Network to send and receive Bitcoin payments by opening a payment channel.
Binance has briefly paused Bitcoin withdrawals in the past for several reasons, most recently because of a spike in trading fees. Any users experiencing difficulties with withdrawals should check official announcements or contact support. Other reasons for withdrawal issues may include insufficient account balance, incomplete security measures (e.g., address whitelisting, 2FA), or account restrictions due to incomplete KYC procedures.
To unlock withdrawals from Binance, users should complete the KYC process, enable 2FA and possibly whitelist their withdrawal address (if necessary). Users should also monitor Binance’s official announcements for withdrawal suspensions or maintenance periods.
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