The Chainalysis analytics platform announced support for the Bitcoin Lightning Network (LN) as part of its transaction-monitoring solution since February 2022.
«VASP, including cryptocurrency exchanges that use Chainalysis KYT (Know Your Transaction) to monitor transactions in real time, will be able to enable deposits and withdrawals of Bitcoin from Lightning nodes, in compliance with regulatory rules» — the press release said.
Chainalysis noted that LN is a second-layer protocol that enables users to conduct transactions almost instantly and with low fees.
The protocol has been operating since 2018, but explosive growth in 2021 demonstrated its impact. In 11 months, the amount of Bitcoin locked in LN channels rose from about 468 BTC to just under 3,600 BTC, the firm noted.
The firm’s analysts believe that to a large extent this is linked to adding to Twitter the ability to accept cryptocurrency donations and the legalization of Bitcoin in El Salvador.
According to Arcane Research, the number of active LN users by 2030 could exceed 700 million.
Blockstream’s chief strategy officer Samson Mow said the move could make Bitcoin a global means of exchange.
«Lightning Network addresses many of the issues that prevent Bitcoin from being used for micropayments and other transactions that promote financial inclusion. By providing customers with LN transaction support, we hope to increase the network’s popularity and assist its scalability», said Pratima Arora, Chainalysis’s Chief Product Officer.
Chainalysis KYT will provide pre-withdrawal checks for LN and a function to flag suspicious activity, the firm said.
In September, media revealed some methods and tools used by Chainalysis to collect information about crypto transactions and users.
In July, after a $100 million Series E funding round, the company’s valuation reached $4.2 billion.