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Fintech Functionality: Blockspaces Harnesses The Power Of Lightning

The financial technology sector continues to grow throughout Tampa Bay, yet many people do not fully realize its applications in everyday li

Mark Parker
May 25, 2022
Fintech Functionality: Blockspaces Harnesses The Power Of Lightning

The financial technology sector continues to grow throughout Tampa Bay, yet many people do not fully realize its applications in everyday life.

We’re highlighting the companies and leaders utilizing fintech solutions to solve problems and increase business. This is the Functionality of Fintech.

A Tampa-based blockchain integration platform is building an innovative network to offer businesses a new payment processing system with near-instant confirmation times and fees of less than a cent.

Historically, completing transactions on the Bitcoin blockchain was a slow process for businesses. Gabe Higgins, co-founder ofBlockSpaces, said that until recently it could take 10 minutes to settle payments utilizing that technology. However, theLightning Networknow enables companies to process millions to billions of transactions per second, withsecurity enforced by blockchain smart contracts.

“And basically, for free,” added Higgins.

He explained that new layers of technology were built over traditional Bitcoin protocols over the last few years, allowing the apex cryptocurrency to serve as a payment rail. Payment rails are the backbone of digital money transfers between individuals and organizations, regardless of national origin or the payment method. Popular payment rails include the Automated Clearing House (ACH), major credit card providers, PayPal and the blockchain.

According toInvestopedia, credit card transactions involve several parties with fees ranging from .5% to 5% and a flat rate of $.20 to $.30 per transaction.

“It completely cuts them out because you don’t need that middleman anymore,” Higgins said of credit card processing fees.

Many people see Bitcoin transactions ascheaper and safersince credit cards are typically handed to another person or swiped at a point-of-sale terminal. Up until recently, a critical impediment to using the network was processing speed.

While credit card transactions involve several intermediaries, they only take a few seconds to complete. Bitcoin transactions can take upwards of 10 minutes depending on the network activity and hash rate – or how many calculations a network can perform per second. Higgins said the Lightning Network, utilizing the underlying Bitcoin blockchain technology, solves that problem.

“They do this all around the world … and it’s working,” said Higgins. “So, we’re trying to make Lightning accessible for businesses to be able to leverage a new payment rail.”

BlockSpaces is building software that allows developers to experiment and deploy the transaction solution within their company. Higgins noted complexities exist in the Lightning Network’s infrastructure, specifically around liquidity management.

Liquidity is essential to managing a Lightning Network node and its channels. Inbound capacities determine how much bitcoin someone can receive, while outbound capacities determine how much they can send. Higgins said BlockSpaces eliminates those challenges in a non-custodial way.

“So, we can still manage the liquidity for our customers, but without owning their liquidity,” said Higgins. “We have our own liquidity in the network that we can push around and enable that ease of use for transactions.

“They can leverage this new payment system with much lower fees, instant settlement time and get all of the benefits of Lightning without all the hassles.”

BlockSpaces, said Higgins, will provide an insular network within Lightning. He noted the traditional hassle of reconciling invoices and said the new process would eliminate middlemen and time spent waiting on payments to settle and clear any back charges. Higgins said to his knowledge, BlockSpaces is the only company focusing on the business-to-business sector.

“The Lightning Network takes away all of that uncertainty and leverages that real-time payment possibility – you can do it now,” he said. “So, tapping into that for a business purpose, that’s what we’re focused on.”

Higgins said Lightning is becoming ground-zero for development on the Bitcoin blockchain. He noted that Jack Dorsey, co-founder of Twitter and founder of payment processing platform Square (now known as Block), stated his company would focus on Bitcoin and integrating the Lightning Network during a recent investor call.

Block’s Cash App platform now utilizes the decentralized technology to ensure bitcoin transactions happen instantly and verifiably through the blockchain. A Twitter post announcing the launch called it the fastest free way for consumers to pay anyone in bitcoin, and BlockSpaces hopes to help grow the number of companies adopting the new process.

“We’re actually working with some of their (Block’s) team in developing some of this stuff,” said Higgins. “It’s a very small, niche community right now.”

Higgins hopes to grow that community when the service launches in August. He said BlockSpaces would probably take a measured approach at first, but added significant interest in the business community exists for this new payment rail.

“So, we feel like now is the perfect time to get in on the ground level of what we think is going to be the next explosion in fintech.”Article on St. Pete Catalyst written by Mark Parker