{"id":21501,"date":"2022-11-02T06:00:00","date_gmt":"2022-11-02T06:00:00","guid":{"rendered":"https:\/\/truliooprod.wpengine.com\/blog\/payments\/lightning-network-kyc"},"modified":"2024-01-17T20:22:03","modified_gmt":"2024-01-17T20:22:03","slug":"lightning-network-kyc","status":"publish","type":"post","link":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc","title":{"rendered":"Examining the Lightning Network and the Need for KYC"},"content":{"rendered":"\n<p>The <a href=\"https:\/\/lightning.network\/\" target=\"_blank\" rel=\"noreferrer noopener\">Lightning Network<\/a> holds the potential to significantly increase transaction speed and volume for the bitcoin payments system.<\/p>\n\n\n\n<p>The network\u2019s capacity <a href=\"https:\/\/cointelegraph.com\/news\/bitcoin-lightning-network-capacity-strikes-5-000-btc\" target=\"_blank\" rel=\"noreferrer noopener\">passed 5,000 bitcoin<\/a>s in October after exceeding 4,000 in June. Network adoption is growing, though it remains relatively small compared with the payment giants.<\/p>\n\n\n\n<p>\u201cIn 2021, Visa handled more than $1 trillion in payment volume and close to 20 billion transactions per month,\u201d according to <a href=\"https:\/\/bitcoinmagazine.com\/business\/the-state-of-lightning-network-adoption\" target=\"_blank\" rel=\"noreferrer noopener\">Bitcoin Magazine<\/a>, citing Arcane Research. \u201cIn comparison, we estimate that the Lightning Network handled about $20 million in payment volume and slightly over 800,000 transactions in February 2022.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-lightning-network\">What is the Lightning Network?<\/h2>\n\n\n\n<p>The Lightning Network creates a payment channel that enables quick, inexpensive bitcoin transfers for two or multiple parties.<\/p>\n\n\n\n<p>Opening a Lightning channel first requires a bitcoin deposit locked into a joint account. The payer then transfers ownership of deposit portions to the recipient. Either party can close the channel or add to the account. When the channel closes, all transactions are combined and sent to the main bitcoin blockchain, which then settles and validates the account.<\/p>\n\n\n\n<p>That leads to far faster transactions and lower fees. The network can handle 1 million transactions per second, compared with seven per second in the bitcoin blockchain. Lightning Network transactions are instant, while those through the bitcoin blockchain can take more than an hour to settle if the network is crowded.<\/p>\n\n\n\n<p>In June 2022, the average <a href=\"https:\/\/www.nasdaq.com\/articles\/the-state-of-lightning-network-adoption\" target=\"_blank\" rel=\"noreferrer noopener\">bitcoin transaction<\/a> fee was $0.73, but reached as high as $34. Transactions through Lightning are less than a penny.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Lightning, KYC and regulations<\/h2>\n\n\n\n<p>Sending money through the network can be particularly ideal when the parties trust each other and perform multiple transactions in a Lightning channel. For example, a family member sending remittances back home can pay low fees and avoid other third parties.<\/p>\n\n\n\n<p>In other instances, security concerns can arise. If one party goes offline, for example, the other party can take the money in the account through an offline transaction scam.<\/p>\n\n\n\n<p>A Lightning channel could run thousands of transactions with only the opening and closing requiring the bitcoin blockchain. While that creates more private transactions, it also limits audits that could identify money laundering and other financial crimes.<\/p>\n\n\n\n<p>In general, financial regulators expect payment systems to have licenses and follow Know Your Customer (<a href=\"\/blog\/kyc\">KYC<\/a>) and Anti-Money Laundering (<a href=\"\/blog\/aml-compliance\">AML<\/a>) requirements. For example, the U.S. Financial Crimes Enforcement Network considers any service that transmits \u201ccurrency, funds, or other value that substitutes for currency to another location or person by any means\u201d a <a href=\"https:\/\/www.fincen.gov\/sites\/default\/files\/2019-05\/FinCEN%20CVC%20Guidance%20FINAL.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">money transmission service<\/a> that falls under regulations.<\/p>\n\n\n\n<p>Lightning transfers value, so regulatory obligations could apply to organizations that use the network. Understanding how <a href=\"\/blog\/aml\/aml-requirements-payment-processors\">payments<\/a> and crypto companies are regulated and deploying best practices can help prevent regulatory scrutiny.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Payments innovation and opportunity<\/h2>\n\n\n\n<p>Coinbase, in considering the Lightning Network\u2019s future, suggests \u201cthe potential to turn crypto\u2019s most valuable asset into a true medium of exchange has the power to bring greater financial inclusion to anyone with a smartphone.\u201d<\/p>\n\n\n\n<p>Lightning holds promise for instant payments, microtransactions and ultra-low fees. It\u2019s a prime example of how digital payments present innovative opportunities for organizations.<\/p>\n","protected":false},"excerpt":{"rendered":"The Lightning Network holds the potential to significantly increase transaction speed and volume for the&#8230;","protected":false},"author":8,"featured_media":32711,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"footnotes":""},"categories":[318],"post-types":[205],"post-topics":[113,135,73],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.1 (Yoast SEO v22.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Examining the Lightning Network and the need for KYC<\/title>\n<meta name=\"description\" content=\"Lightning transfers value, so regulatory payments, crypto and KYC obligations could apply to organizations that use the network.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Examining the Lightning Network and the need for KYC\" \/>\n<meta property=\"og:description\" content=\"Lightning transfers value, so regulatory payments, crypto and KYC obligations could apply to organizations that use the network.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\" \/>\n<meta property=\"og:site_name\" content=\"Trulioo\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/trulioo\" \/>\n<meta property=\"article:published_time\" content=\"2022-11-02T06:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-01-17T20:22:03+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.trulioo.com\/wp-content\/uploads\/2022\/11\/Lightning-Network.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2400\" \/>\n\t<meta property=\"og:image:height\" content=\"1370\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Paul Valkama\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@trulioo\" \/>\n<meta name=\"twitter:site\" content=\"@trulioo\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Paul Valkama\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\"},\"author\":{\"name\":\"Paul Valkama\",\"@id\":\"https:\/\/www.trulioo.com\/#\/schema\/person\/4dedbd41574b6b5754919a490ed4d5ae\"},\"headline\":\"Examining the Lightning Network and the Need for KYC\",\"datePublished\":\"2022-11-02T06:00:00+00:00\",\"dateModified\":\"2024-01-17T20:22:03+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\"},\"wordCount\":515,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.trulioo.com\/#organization\"},\"articleSection\":[\"Payments\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\",\"url\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\",\"name\":\"Examining the Lightning Network and the need for KYC\",\"isPartOf\":{\"@id\":\"https:\/\/www.trulioo.com\/#website\"},\"datePublished\":\"2022-11-02T06:00:00+00:00\",\"dateModified\":\"2024-01-17T20:22:03+00:00\",\"description\":\"Lightning transfers value, so regulatory payments, crypto and KYC obligations could apply to organizations that use the network.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.trulioo.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Payments\",\"item\":\"https:\/\/www.trulioo.com\/post-topics\/payments\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Examining the Lightning Network and the Need for KYC\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.trulioo.com\/#website\",\"url\":\"https:\/\/www.trulioo.com\/\",\"name\":\"Trulioo\",\"description\":\"Building trust online (online identity verification services)\",\"publisher\":{\"@id\":\"https:\/\/www.trulioo.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.trulioo.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.trulioo.com\/#organization\",\"name\":\"Trulioo\",\"url\":\"https:\/\/www.trulioo.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.trulioo.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.trulioo.com\/wp-content\/uploads\/2023\/01\/Trulioo-Wordmark-Dark-Green.png\",\"contentUrl\":\"https:\/\/www.trulioo.com\/wp-content\/uploads\/2023\/01\/Trulioo-Wordmark-Dark-Green.png\",\"width\":2784,\"height\":1464,\"caption\":\"Trulioo\"},\"image\":{\"@id\":\"https:\/\/www.trulioo.com\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/trulioo\",\"https:\/\/twitter.com\/trulioo\",\"https:\/\/www.linkedin.com\/company\/trulioo\",\"https:\/\/www.instagram.com\/trulioo_global\/\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.trulioo.com\/#\/schema\/person\/4dedbd41574b6b5754919a490ed4d5ae\",\"name\":\"Paul Valkama\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.trulioo.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/ae0ad041b53eb878badb2c5744ad4691?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/ae0ad041b53eb878badb2c5744ad4691?s=96&d=mm&r=g\",\"caption\":\"Paul Valkama\"}}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Examining the Lightning Network and the need for KYC","description":"Lightning transfers value, so regulatory payments, crypto and KYC obligations could apply to organizations that use the network.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc","og_locale":"en_US","og_type":"article","og_title":"Examining the Lightning Network and the need for KYC","og_description":"Lightning transfers value, so regulatory payments, crypto and KYC obligations could apply to organizations that use the network.","og_url":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc","og_site_name":"Trulioo","article_publisher":"https:\/\/www.facebook.com\/trulioo","article_published_time":"2022-11-02T06:00:00+00:00","article_modified_time":"2024-01-17T20:22:03+00:00","og_image":[{"width":2400,"height":1370,"url":"https:\/\/www.trulioo.com\/wp-content\/uploads\/2022\/11\/Lightning-Network.jpg","type":"image\/jpeg"}],"author":"Paul Valkama","twitter_card":"summary_large_image","twitter_creator":"@trulioo","twitter_site":"@trulioo","twitter_misc":{"Written by":"Paul Valkama","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#article","isPartOf":{"@id":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc"},"author":{"name":"Paul Valkama","@id":"https:\/\/www.trulioo.com\/#\/schema\/person\/4dedbd41574b6b5754919a490ed4d5ae"},"headline":"Examining the Lightning Network and the Need for KYC","datePublished":"2022-11-02T06:00:00+00:00","dateModified":"2024-01-17T20:22:03+00:00","mainEntityOfPage":{"@id":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc"},"wordCount":515,"commentCount":0,"publisher":{"@id":"https:\/\/www.trulioo.com\/#organization"},"articleSection":["Payments"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc","url":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc","name":"Examining the Lightning Network and the need for KYC","isPartOf":{"@id":"https:\/\/www.trulioo.com\/#website"},"datePublished":"2022-11-02T06:00:00+00:00","dateModified":"2024-01-17T20:22:03+00:00","description":"Lightning transfers value, so regulatory payments, crypto and KYC obligations could apply to organizations that use the network.","breadcrumb":{"@id":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.trulioo.com\/blog\/payments\/lightning-network-kyc#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.trulioo.com\/"},{"@type":"ListItem","position":2,"name":"Payments","item":"https:\/\/www.trulioo.com\/post-topics\/payments"},{"@type":"ListItem","position":3,"name":"Examining the Lightning Network and the Need for KYC"}]},{"@type":"WebSite","@id":"https:\/\/www.trulioo.com\/#website","url":"https:\/\/www.trulioo.com\/","name":"Trulioo","description":"Building trust online (online identity verification services)","publisher":{"@id":"https:\/\/www.trulioo.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.trulioo.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.trulioo.com\/#organization","name":"Trulioo","url":"https:\/\/www.trulioo.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.trulioo.com\/#\/schema\/logo\/image\/","url":"https:\/\/www.trulioo.com\/wp-content\/uploads\/2023\/01\/Trulioo-Wordmark-Dark-Green.png","contentUrl":"https:\/\/www.trulioo.com\/wp-content\/uploads\/2023\/01\/Trulioo-Wordmark-Dark-Green.png","width":2784,"height":1464,"caption":"Trulioo"},"image":{"@id":"https:\/\/www.trulioo.com\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/trulioo","https:\/\/twitter.com\/trulioo","https:\/\/www.linkedin.com\/company\/trulioo","https:\/\/www.instagram.com\/trulioo_global\/"]},{"@type":"Person","@id":"https:\/\/www.trulioo.com\/#\/schema\/person\/4dedbd41574b6b5754919a490ed4d5ae","name":"Paul Valkama","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.trulioo.com\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/ae0ad041b53eb878badb2c5744ad4691?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/ae0ad041b53eb878badb2c5744ad4691?s=96&d=mm&r=g","caption":"Paul Valkama"}}]}},"_links":{"self":[{"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/posts\/21501"}],"collection":[{"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/comments?post=21501"}],"version-history":[{"count":1,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/posts\/21501\/revisions"}],"predecessor-version":[{"id":40536,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/posts\/21501\/revisions\/40536"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/media\/32711"}],"wp:attachment":[{"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/media?parent=21501"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/categories?post=21501"},{"taxonomy":"post-types","embeddable":true,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/post-types?post=21501"},{"taxonomy":"post-topics","embeddable":true,"href":"https:\/\/www.trulioo.com\/wp-json\/wp\/v2\/post-topics?post=21501"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}