Buy Gold With the Lightning Network

The Lightning Network (LN) is typically used to purchase low-value items where the alternative of on-chain fees could cost more than the price of the item purchased. A typical example would be buying a coffee for $4 at Brisbane Airport, which could cost several dollars if the purchase was made without LN. As the name suggests, the LN is also much quicker than using a regular decentralized network like the bitcoin blockchain. Processing times are reduced from more than 60 minutes down to just a few seconds with LN.

Despite the expectation that LN will be a major boost for vendors retailing low-cost items, it can also be used by retailers of high-value items where the speed of processing is not considered too important.

Pound for pound, gold is one of the highest value commodities on the planet and considered by many as an essential element of a balanced investment portfolio. Vaultoro, the UK-registered exchange, has been offering crypto to gold bullion trading since 2015, but they announced on their blog, May 4, 2018, that they have now implemented LN on the exchange.

Vaultoro allows investors to purchase as little as 0.001g of gold, and at $44 per gram, it represents a nominal investment of less than five cents. The price of gold does fluctuate, but it’s nowhere near as volatile as cryptocurrencies like bitcoin, so the LN attribute of processing a transaction in a few seconds is not essential. What is important for investors looking to purchase a tiny amount of gold is a low fee, and this is why Vaultoro has introduced LN. It’s unlikely that many investors would buy the minimum amount of gold, but with a purchase of 1g (about $44), LN should reduce the purchasing cost from $4 to well under $1, including Vaultoro commissions.

Investors should also factor in the annual storage costs for the gold bullion they purchase with Vaultoro. The gold is held in Swiss bank vaults, and the yearly storage cost is currently around 0.41%. In addition to the storage costs, Vaultoro charge between 0.2 and 0.5% for each trade depending on the amount of business each investor has with the exchange. As LN is still in beta release, Vaultoro is currently limiting investors to trial transfers of up to 100 satoshis. This means investors need to process dozens of transactions via LN before they have sufficient funds on the exchange to be able to purchase a meaningful amount of gold. Crypto Disrupt received the following reply from Vaultoro when we queried the 100 satoshi limit “We will be raising the invoice limit soon. Sorry for that. It’s fun being Lightning reckless but not too reckless 🙂

Financial analyst, smartphone app designer, technical writer, and crypto enthusiast. Blockchain verified graduate of MOOC 9, DFIN-511: Introduction to Digital Currencies, run by the University of Nicosia.