Twitter CEO Jack Dorsey backs Bitcoin with investment

The billionaire CEO of Twitter, Jack Dorsey, has just invested millions into Bitcoin.

Dorsey, among other investors, has backed Lightning Labs, a young, Bay Area-based cryptocurrency startup.

The fintech companies goal is to make sending Bitcoin and Litecoin more efficient by reducing transaction times and costs.

The firm announced this week that it had raised $2.5 million in funding so far from numerous big-name investors.

Aside from Twitter and Square co-founder Jack Dorsey, Litecoin creator Charlie Lee, Robinhood co-founder Vlad Tenev, Square exec Jacqueline Reses, serial-founder-turned investor David Sacks, Eventbrite co-founder Kevin Hartz, BitGo CTO Ben Davenport, along with The Hive, Digital Currency Group and others have all invested in Lightning Labs.

In a tweet earlier this week, David Sacks described the start-up as “one of the most important projects in crypto overall.”

Why are they all so excited?

Lightning Labs works off Lightning Network, a new protocol that’s sometimes referred to as the second layer of Bitcoin.

Many, including Lightning Labs, see this newer layer as a way to exponentially boost the number and speed of transactions of Bitcoin on the blockchain – the software that powers the cryptocurrency.

The blocks on the blockchain are batches of transactions that are confirmed and then shared on Bitcoin’s public ledger.

One answer to speeding up Bitcoin’s transaction speeds is to increase these blocks, which is basically what Bitcoin Cash is – Bitcoin with larger blocks.

The key to the Lightning Network is that it sits alongside the blockchain and doesn’t require adjustments to the block’s size.

The Lightning protocol essentially aims to let two or more people create instant, high-volume transactions while still using the underlying blockchain for security.

What’s the catch?

If transactions are happing outside of the blockchain, it has left many wondering if one of the leading benefits of the blockchain – security – may be impaired.

But according to Lightning Labs, their technology allows you to do away with counter-party risk.

Essentially, you don’t need to trust someone you are transacting with because — ostensibly, anyway — your cryptocurrency cannot be stolen.

The process uses a cryptographic “proof” that is created when users initially broadcast that first transaction (and updated versions of it) to the blockchain.

That proof ensures that if one party tries to steal from another, not only will it be impossible to succeed, but as a penalty for trying, the thief’s currency will be awarded to the person whose money they were trying to steal.

If someone attempts to drop offline in the middle of a transaction with the aim of stealing someone else’s crypto, there are separate safety measures put in place.

The system will use time-out periods that, when they expire, ensure that the cryptocurrency sender gets back their money.

The blockchain, therefore, acts as a kind of unbiased arbiter.

There’s also a built-in system to allow sending of payments to multiple parties, completely securely, called multi-hop routing.

Growing technology

Lightning Labs isn’t the first company to emerge in the field of smart Lightning contracts.

It has come further than anyone else though, says co-founder and CEO Elizabeth Stark.

According to Stark, more than 1,800 developers are part of her company’s Slack channel, with thousands of additional volunteers also helping out.

Thanks to that additional help, Lightning was able to roll out a beta version this week that’s open to anyone.

Lightning Labs’ technology, which currently allows people to transact with Bitcoin and Litecoin for now, is only available on desktops at the moment, but a new mobile version is coming soon.

The internet giants’ massive FUD factory

Following recent announcements from Google and Facebook that they will ban cryptocurrency-related ads on their networks, Jack Dorsey and Twitter have come under pressure to impose similar restrictions.

The news this week that Google had banned these types of ads spread a huge amount of fear, uncertainty, and doubt (FUD), sending prices spiraling into the red as a result.

There have been unverified reports in the last couple of days that Twitter will impose a ban, but it’s still only rumored at this point.

With Jack Dorsey having an active interest in the future of cryptocurrency, however, these reports will hopefully just remain as nothing more than just rumors.