Mercury Wallet, a Layer 2 application built for Bitcoin, is currently developing infrastructure to integrate with the Lightning Network.
Applications like Mercury are a way of scaling the use of Bitcoin by temporarily performing transactions off chain before returning to the main chain, making it easier and more cost-effective to make payments to other users. But what is Mercury Wallet, how does it differ from the Lightning Network and what could its integration ultimately accomplish for Bitcoin growth?
In order to understand the Mercury Wallet, we must first understand the technology Mercury uses to build its application: statechains.
A statechain works in a very similar way to a blockchain or a sidechain. In short, a statechain provides cryptographic proof of ownership for any given statecoin. A statecoin can be thought of as representing digital currency without actually being the digital currency, which, in this case, would be bitcoin.
Similarly, the easiest comparison to understand a statecoin is to think of it in the way that paper money is tied to a gold standard. The paper currency is not the actual gold, it just represents some of gold’s value. Similarly, a statecoin is not bitcoin, it is just meant to represent some of bitcoin’s value. This allows users to transact the value of bitcoin without interacting with the Bitcoin blockchain.
Now that we have a basic premise for statechains and statecoins, let’s return to Mercury.
What Is Mercury Wallet?
Mercury Wallet is itself an implementation of a statechain. The wallet is how unspent transaction outputs (UTXOs), or funds are organized into a statechain once they are deposited.
When a user opts in to use Mercury Wallet, they deposit UTXOs into the wallet through the graphical user interface (GUI) in a fairly straightforward process. Depositing UTXOs into Mercury Wallet is
