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.
Lightning Transactions Compliant
Chainalysis announced Friday that it has now added Lightning Network support to the list of crypto-asset and blockchain networks the company monitors. Chainalysis monitors the Bitcoin blockchain for years. Now, the company is monitoring a multitude of other crypto networks as well as decentralized finance 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 mentions, too that countries like El Salvador are able to leverage the LN L2 system. Chainalysis’ chief product officer Pratima Arora explains how the company hopes that LN transactions will be compliant.
“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 to Chainalysis KYT Customer Customers Launched in February
Chainalysis has increased its resources tremendously and is now facing dozens of competitors in blockchain monitoring and intelligence. In its Series E round, Chainalysis raised $100m. Previous C and D rounds received capital injections totaling $100 million. 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.
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