Original source: OmniBOLT
What is Lightning Global Cashier?
The global cashier is an important part of cross-border payments and is vital to individuals, businesses, traders, institutions and other international organizations. The Lightning Network Global Cashier refers to a payment and collection platform that uses the Lightning Network technology. The Lightning Network solves the transaction scalability problem of the blockchain and truly realizes fast transfer payments, so that cross-border transactions can be done in real time and efficiently.
With the rise of blockchain technology and decentralized finance (DeFi), as more and more individuals and businesses seek to use digital assets for transactions, the demand for cross-border and cross-domain payments in the Web3 ecosystem is growing.
Traditionally, cross-border payment collection is realized by banks and financial institutions, usually involving a complex network of intermediaries such as agent banks and clearing houses. This leads to many difficulties such as "difficulty in collecting foreign exchange, low efficiency, high risk, high fees, and serious exchange losses".
In contrast, cross-border payments based on the Lightning Network can eliminate intermediaries, reduce costs, and increase the speed and security of financial transactions.
In addition to the Lightning Network, there are many alternative blockchain technologies and products that can be used for cross-border payments and cash collection. Cross-border payments on the blockchain provide faster payment solutions for business-to-business and person-to-person transactions, and have proven to be a game-changing financial initiative in international remittances. Among them, the Lightning Network technology is one of the most promising technologies. The representative protocols are BOLT and OmniBOLT. BOLT is a second-layer protocol that supports BTC payments, while OmniBOLT has made a major expansion to support lightning payments and collections of various assets including USDT.
Cross-border checkout paradigm migration
Cross-border payment using blockchain technology leverages the decentralization and security of blockchain to facilitate transactions between parties in different countries and using different currencies.
The advantages of blockchain-based cross-border payments over traditional cross-border payments and settlements are driven by a novel architecture based on blockchain and ledger technology. The Lightning Network is a second-layer technology based on the BTC public chain, which mainly solves the problem of transaction scalability while ensuring security. As mentioned above, the main protocols that currently provide Lightning Network technology are BOLT and OmniBOLT.
The traditional cashiering process is that international bank transfers between senders and receivers are connected through an intertwined banking network, including but not limited to commercial banks, clearing houses, credit unions and other financial service institutions. Due to the large number of participating institutions, the process is complicated and slow.
They can look complex, like the four-square pattern shown below:
Figure 1: Four-party model cashier and payment
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a messaging network used by traditional banks and financial institutions around the world to exchange financial transaction information securely and quickly. However, SWIFT also faces challenges such as high costs, limited transparency, restricted access, and centralized control.
On the other hand, smart contracts automatically execute blockchain cross-border payment transactions according to predefined rules. Eliminating intermediaries can achieve completely transparent instant transactions. Specifically for the Lightning Network, it mainly relies on HTLC contracts. The OmniBOLT protocol also provides practical contracts such as "offline clearing, online settlement" to help the cash register system better fit the actual operating environment.
Figure 2: Real-time point-to-point clearing and settlement model
What are the advantages of Lightning Network Global Cashier?
Compared with traditional payment methods, the cash register system using Lightning Network technology has many advantages, including faster settlement time, extremely small transaction costs and exchange costs, higher security and greater transparency:
1. Near real-time processing: Layer 2 scaling technology can complete a transaction in milliseconds, regardless of the distance between the payee and the payee.
2. Low cost: Eliminating intermediaries and better expansion solutions have greatly reduced the transaction costs of blockchain transmission. The use of lightning network has also saved transaction mining fees.
3. Automatic record keeping: Immutable blockchain accounting technology enables transparent and verifiable records as all payment transactions and related data are automatically time-stamped and recorded.
4. Security: Public-private encryption, data hashing, multi-party authorization, and fraud detection smart contracts provide security for cross-border cashiering.
These advantages benefit not only multinational corporations, but also small businesses and individuals involved in global trade. Suppose Alice, the owner of a small fashion boutique in Sri Lanka, wants to send money to her business partner Bob, who lives in Canada.
Traditionally, Alice would have to go through a bank or other financial institution to make this transaction, which can involve high fees and long processing times. However, if both Alice and Bob have Lightning Network wallets, they can transfer funds (BTC, USDT) directly between each other. They can then exchange it to local fiat currency at any time, or they can choose not to exchange it and use the wallet balance to pay and cash out the next time they need to pay.
This type of payment using BOLT or OmniBOLT can be completed in half a second, instead of taking days or weeks like traditional bank transfers. In addition, Alice's transaction costs are definitely much lower than the fees charged by banks. At the same time, if you choose USDT payment, you don’t have to worry about the fluctuations of the payment medium.
What types of transactions does Lightning Network cross-border payment support?
Business-to-business cross-border cash and payments are transactions between two businesses in different countries that utilize blockchain technology. These transactions can include payments for goods, services, or other financial transactions, and are typically executed using cryptocurrencies or stablecoin solutions with fair value.
On the other hand, person-to-person blockchain cross-border cash and payment is a transaction between individuals in different countries using blockchain technology. These transactions can include sending money to friends or family, purchasing goods or services, or other financial transactions.
Businesses and individuals are increasingly turning to various options for blockchain technology as a way to simplify cross-border payment processes. The main manifestations are the following three:
1. Pay with cryptocurrency, receive with cryptocurrency
2. Pay with cryptocurrency and receive with fiat currency, or pay with fiat currency and receive with cryptocurrency
3. Fiat currency payment and cash collection at both ends, cryptocurrency in the channel
Is it safe to use Lightning Network for global checkout?
The Lightning Network is built on cryptography, BTC distributed ledger technology and the principle of decentralization, and transaction security is guaranteed by the BTC main chain.
The BTC main chain uses a distributed ledger to record transactions, which means that every participant in the network has a copy of the ledger, and each transaction is verified by a consensus mechanism before being added to the ledger. This makes it difficult for any party to tamper with data or change transaction records.
In addition to these technical principles, the BOLT and OmniBOLT payment systems use encryption to protect user data and private keys, which are required to access and transfer funds. This adds an extra layer of security, making it more difficult for hackers or other malicious actors to access sensitive information.
However, like any payment system, blockchain-based payment systems are not immune to all risks, and users should take appropriate measures to protect their assets, such as using secure passwords, two-factor and multi-signature authentication, and storing private keys in a safe place. As long as the wallet is managed securely, the user's funds are safe.
This article is a contribution and does not represent the views of BlockBeats.
