On December 10, the blockchain intelligence firm Chainalysis revealed that the company has added support for Bitcoin’s second-layer protocol the Lightning Network (LN). According to Chainalysis, firms like exchanges and virtual asset service providers (VASPs) can leverage the company’s Know-Your-Transaction (KYT) real-time transaction monitoring software in order to access compliant bitcoin deposits and withdrawals from a LN node.
Compliant Lightning Transactions
The blockchain surveillance and intelligence company, Chainalysis, announced on Friday that the company has added Lightning Network (LN) support to its list of blockchain and crypto-asset networks, the company currently monitors. For years, Chainalysis has monitored the Bitcoin (BTC) blockchain, and these days the firm is not only monitoring BTC, but also a myriad of crypto networks and decentralized finance (defi) protocols.
Essentially, the LN is an offchain routed “layer 2” (L2) payment channel network that helps facilitate bitcoin (BTC) transfers faster and cheaper than onchain transactions. The Chainalysis LN support will provide VASPs with “Chainalysis KYT (Know-Your-Transaction) for real-time transaction monitoring will now be able to compliantly allow deposits and withdrawals of Bitcoin from a Lightning node.”
As of December 1, 2021, Chainalysis estimates there is “just under 3,600 BTC worth over $205 million is locked in public Lightning Network channels.” This has increased a great deal since the total value locked in the LN was around 468 BTC on January 1, 2021. Chainalysis also mentions that the LN L2 system is leveraged by countries such as El Salvador and large corporations like Twitter. Pratima Arora, the chief product officer at Chainalysis explains that the firm hopes compliant LN transfers will help the LN mature.
“Chainalysis exists to build trust in cryptocurrency in order to promote more financial freedom with less risk,” Arora said in a statement. “The Lightning Network solves many of the challenges that prevent the Bitcoin protocol from being used for micropayments and other transaction types that bolster financial inclusion. By enabling our customers to compliantly support Lightning transactions, we hope to grow the network’s popularity and help it scale.”
Lightning Network Support for Chainalysis KYT Customers to Launch in February
Chainalysis has expanded its resources a great deal and faces dozens of blockchain intelligence and monitoring competitors. The company raised $100 million at the end of June in its Series E funding round and the previous C and D rounds also saw $100 million capital injections. The company’s post valuation, after the Series E, was $4.2 billion according to the firm’s announcement at the time.
Speaking about the LN support, Chainalysis claims that for the first time, “VASPs can now offer support for Lightning transactions aligned with global regulatory best practices.” The product Chainalysis offers called Chainalysis KYT supports “pre-screening for Lightning withdrawals and behavioral alerts.” The blockchain surveillance and intelligence company further says that the LN support will be available for Chainalysis KYT customers in February.
What do you think about Chainalysis adding Lightning Network support? Let us know what you think about this subject in the comments section below.
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Author: Jamie Redman