The buyer was able to send an impossibly small amount of money thanks to the Lightning Network.
If you want to understand the power of the Lightning Network, it doesn’t get much better than this.
The Lightning Network is a second-tier solution designed to work on top of the Bitcoin protocol, enabling extremely fast and low-cost micro-transactions. Bitcoin is secure, but it’s slow and the fees make transferring small amounts of money prohibitively expensive. Back in December last year, it could easily cost $20 to send a bitcoin tx. While fees are much lower now, often coming in at just a few cents, that’s still too much if you’re looking to move a small amount of value. If bitcoin is to be a useful currency as well as store of value – ‘digital gold’ – that needs addressing.
Lightning Network allows users to send very small amounts of money, practically instantly. Millions of minuscule, millisecond-speed transfers can be made within payment channels, agreed by participants but not immediately submitted to the blockchain. Ultimate blockchain settlement of the balance offers Bitcoin’s unbeatable security, but without the need to wait around for the next block or pay the per-tx fees. It’s a little like commercial banks clearing with the central bank at the end of the day.
What this means in practice is that Bitcoin can be used to send just cents – or less – very efficiently. It makes it possible to pay for everyday goods as well as big-ticket items. But this example is truly remarkable.
This artist held a micro-auction for his work ‘black swan, 2018’ – a small picture made using the media of fiat money and counterfeit detection pen ink. The quirk of this auction was that the artist sold it for the smallest amount of money offered, not the largest. In the real world that would be $0.01 (one cent). Using bitcoin, it would be one satoshi (0.00000001 BTC). But using Lightning Network, the winning bidder was able to send one thousandth of a satoshi, equivalent to just $0.000000037 at the time.
That makes black swan, 2018 simultaneously the cheapest work of art ever sold, and one of the most innovative ever created.
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