The Lightning Network is a Layer-2 solution designed to address Bitcoin transactions’ scalability and speed issues. It creates off-chain payment channels that allow users to conduct transactions almost instantly and at a fraction of the cost compared to traditional on-chain methods.

By enabling multiple transactions to occur off-chain and only recording the final balance on the main blockchain, it can alleviate congestion and reduces fees, making microtransactions more viable and enhancing the overall efficiency of the Bitcoin network.

The growth of the Lightning Network can indicate more people are using Bitcoin for everyday transactions, a sign of wider cryptocurrency adoption. Changes in the Lightning Network can also reflect shifts in market sentiment — a sudden increase in capacity could indicate a bullish sentiment as more users seek access to quick and cheap Bitcoin transactions, and vice versa.

Lightning Network capacity refers to the total amount of Bitcoin transacting within the network at any given time. A decrease in capacity could hinder the network’s ability to process many transactions. According to Glassnode, the Lightning Network’s capacity dropped significantly between July and August, decreasing by almost 13% in the past 30 days.

Visa is taking significant strides toward simplifying blockchain transactions. In what could be a game-changer for users, the payment giant has been working on an experimental solution that allows for the payment of on-chain gas fees with a Visa card.

Mustafa Bedawala, a product manager at VISA, shared the publication while detailing a perceived problem with crypto wallets; the constant need to manage ETH balances for gas fees.

The typical process of using Ethereum requires users to purchase ETH either on an exchange or via an on-ramp service, followed by transferring ETH to their wallets to ensure sufficient coverage for fluctuating gas fees. This constant shifting of gas prices often results in users either overpaying or falling short of their ETH supply, adding a layer of complexity and friction.

Visa Card payments for gas fees

Visa’s proposed solution leverages Ethereum’s ERC-4337 account abstraction standard and a feature known as the “paymaster” smart contract, which facilitates off-chain gas fee payments. The process is envisaged to work as follows:

1. A user initiates an Ethereum transaction through their wallet, which then sends the transaction details to the paymaster web service.

2. The web service calculates the cost of the gas fee and subsequently charges the user’s Visa card using Visa’s Cybersource system to process the card payment.

3. Following this, the web service sends back a digital signature to the wallet, approving the payment. This approval is valid for a specified time window.

4. The wallet attaches this signature to the transaction and forwards it to Ethereum.

5. The paymaster smart contract then verifies the validity of the signature and covers the gas cost to process the transaction.