Here’s Why Binance Is Integrating the Bitcoin Lightning Network

High gas fees, leading to a pause in withdrawals, prompt Binance to accelerate its move to Bitcoin’s Lightning Network.

Army of binance robots with an angry lightning God in the middle.
Created by Kornelija Poderskytė from DailyCoin
  • 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.

Graph showing a surge in Bitcoin gas fees.
source: YCharts

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. 

FAQs

Does Binance use Bitcoin Lightning?

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.

Can you buy Bitcoin Lightning Network?

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.

Why am I unable to withdraw Bitcoin on Binance?

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.

How do I unlock withdrawals from Binance?

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.

Read about Bitcoin NFTs that are driving up gas costs:

Bitcoin NFTs: What Makes BTC JPEGs so Extra-Ordinal?

Read about the latest memecoin craze, the Pepe token: 

PEPE Jumps 132.31% as Binance, KuCoin List Controversial Token

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

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David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.