Chainalysis Integrates Lightning Network Functionality into Blockchain Platform
Chainalysis and the Lightning Network: Enhancing Compliance and Security for Bitcoin Transactions
In a move that could potentially boost the adoption and trust in Bitcoin transactions, Chainalysis has announced its support for the Lightning Network, a second-layer protocol built on top of the bitcoin blockchain. This integration aims to enhance compliance and security for Bitcoin transactions.
Launched in 2018, the Lightning Network is a decentralized mechanism for making quick, high-volume micropayments without relying on third parties. It has seen more adoption in 2021 than any other year, with the number of active nodes increasing by 128 percent since January 2021. This growth can be attributed in part to the Salvadoran government's adoption of Bitcoin as legal tender and Twitter's integration of Bitcoin for its tipping feature.
As of December 1, 2021, approximately 3,600 BTC worth over $205 million is locked in public Lightning Network channels, a significant increase from 468 BTC worth around $4.8 million on January 1, 2021. This growth indicates a growing interest in using the Lightning Network for high-volume, quick transactions.
Companies handling Bitcoin payments through Lightning nodes can now use Chainalysis Know Your Transaction (KYT) compliance software. Chainalysis KYT is a tool used for monitoring blockchain data and ensuring compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. With this integration, Lightning withdrawals and behavioral alarms will be pre-screened by Chainalysis KYT, potentially reducing the risk of illicit activities in Bitcoin transactions.
Pratima Arora, Chainalysis chief product officer, stated that the Lightning Network solves challenges preventing Bitcoin from being used for micropayments and other transaction types that bolster financial inclusion. The integration of the Lightning Network with Chainalysis KYT could potentially increase the adoption and trust in Bitcoin transactions.
Chainalysis announced its support for the Lightning Network in early February 2022, and Chainalysis KYT for the Lightning Network is planned to be available later in 2022. This integration may attract more businesses to use Bitcoin for high-volume, quick transactions, further boosting the popularity and potential scaling of the Lightning Network. Additionally, the integration allows virtual asset service providers (VASPs) like exchanges to process Bitcoin transactions according to international standards.
The adoption of the Lightning Network has the potential to revolutionize the way Bitcoin transactions are conducted, making them faster, more efficient, and more secure. With the integration of Chainalysis KYT, businesses can now conduct Bitcoin transactions with increased confidence in their compliance and security measures.
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