February 26, 2018, 2:33 PM EST
It’s one of the best-known cryptocurrency legends: The guy who bought two pizzas with 10,000 Bitcoin back in 2010 to prove the digital currency worked. Now he’s at it again.
This time, early Bitcoin developer Laszlo Hanyecz wanted to test the Lightning Network, a technology that runs parallel to a blockchain like Bitcoin’s network and aims to speed up transactions. He ended up paying 0.00649 Bitcoin for two pizzas, or $67, and the transaction cost about 6 U.S. cents.
When Hanyecz bought pizza with Bitcoin about eight years ago, it was one of the first purchases done with the cryptocurrency, and it showed the Bitcoin community that it could actually be used as a means of exchange, he said. That was put in doubt late last year as transaction fees skyrocketed to as a high as $55, according to data provider BitInfoCharts, making everyday purchases impractical. Developers, including those for the Lightning Network, are working on ways to solve this problem.
“I wanted to show that yes, you still can buy pizzas with Bitcoin,” Hanyecz said in a telephone interview from Jacksonville, Florida. “But if it’s a $50 pizza and a $100 transaction fee, that doesn’t work. The idea is that on Lightning Network we can get the security of Bitcoin and instant transfers. You don’t have to wait for a blockchain confirmation.”
Bitcoin’s transaction fees soared in December as the price skyrocketed
Lightning Network works when two parties open a payment channel between each other, committing funds to the channel. The parties can then transact without having to broadcast the transactions to the Bitcoin blockchain, avoiding delays and costs. Once the channel is closed, only the resulting balances are recorded on the blockchain, not the full transaction history of the channel.
The mechanism is far from frictionless at this stage as the technology is still in a beta, or a testing stage. Hanyecz opened a payment channel with another blockchain enthusiast, who ordered the pizza for him. The delivery person was instructed to only deliver the pizza if Hanyecz showed him the first and last four characters of the string of code that proved he had made the payment. He showed him the numbers he had written down on a notebook, the driver saw they matched with what Hanyecz’s friend had told him, and he delivered the pizza.
The pizza Hanyecz bought was worth about $30 on May 22, 2010, compared to $100 million for 10,000 Bitcoin today. That day has been remembered as Bitcoin Pizza Day since.