BitcoinTechnology

The Lightning Network Is Growing Rapidly and Changing Bitcoin's Payment Narrative

The growth of Bitcoin's Lightning network has exploded in recent weeks. Several key metrics used to measure the network size and connectivity have reached all-time highs.

Among them: the public node count which, after reaching 10,000 only in April, has since surpassed the 25,000 mark, according to data from 1ML.

Meanwhile, the network's capacity (the total amount of bitcoin on the network) has reached over 2,300 bitcoin at the time of writing. That is a 21% increase in the last month and a 35% increase since mid-June, when the BTC Times last reported on the Lightning Network's growth.


These numbers come just weeks before El Salvador's Bitcoin law goes live on September 7th, which is set to effectively make Lightning a primary payment method for the Central American nation. 

Perhaps more impressive is that these Lightning metrics are likely underestimated due to the private nature of the Lightning network. A significant number of Lightning nodes and channels are private, which makes exact tracking difficult. In 2020 BitMEX Research estimated that as much as 27.8% of Lightning Network channels containing around 12% of total network capacity are not being tracked.

What's Causing This Growth?

The Lightning Network is a scaling solution that addresses the trade-offs that come with the decentralized and immutable nature of Bitcoin, namely low-throughput, potentially high fees, and transaction latency. 

Lightning allows Bitcoin transactions to take place off-chain via peer-to-peer channels. Despite the absence of a third party, Lightning is highly scalable thanks to its routing capabilities: instead of each participant having to open a channel with every party they want to transact with, transactions automatically find the quickest path through the network utilizing already existing connections.  

The end result is a near-instantaneous payment system with almost zero fees and high energy efficiency. Lightning is capable of completing millions of transactions per second, making it the preferred scaling solution among many bitcoiners.


Lightning Is Getting Easier to Use 

Despite the clear need for Lightning, early users often found the network cumbersome and difficult to use. Recent technological improvements have drastically changed the experience. Some of these updates include: 

On-Demand Node Services

One of the primary barriers to early Lightning adoption was the technical knowledge needed for users to manage their own nodes and channels. Custodial services allowed some users to bypass these difficulties, but with the downside of having to trust the service provider to handle their funds.

Lightning software is improving to the point where users can easily spin up self-managed nodes using cloud infrastructure, without having to set up any hardware themselves. This greatly reduces the technical barriers to mainstream adoption.

Atomic Multipath Payments (AMP) 

Another key breakthrough was the introduction of Atomic Multipath Payments in 2019. Rather than requiring each channel to carry sufficient liquidity for an entire payment to pass through, each payment can be broken into pieces and combined across various channels to more reliably find a route to its destination.

Taproot

The activation of widely anticipated upgrade Taproot will come with privacy improvements to Lightning as well, adding to the privacy of payment routing.

El Salvador's Lightning Adoption

When El Salvador officially makes Bitcoin legal tender on September 7th, it is anticipated that the Lightning Network will be doing most of the heavy lifting day-to-day, serving as the backbone of the country's Bitcoin payment infrastructure. The successful implementation of Lightning via projects like Bitcoin Beach in El Zonte served as the inspiration for El Salvador's Bitcoin Law

This is possibly facilitating further adoption in the country as both merchants and citizens prepare for September 7th. Meanwhile, bitcoiners outside El Salvador have been invigorated with a new excitement for the layer two-solution in anticipation of its large scale rollout.

New Applications and Use Cases

With Lightning adoption gaining speed, a new wave of popular third-layer tools and applications are springing up on top to provide entirely new use cases. 

Strike

Strike and its CEO Jack Mallers played a key role in bringing Bitcoin and Lightning adoption to El Salvador, but Strike's growth and popularity extends beyond the small Central American country and is growing quickly across the world. The payment application utilizes Lightning to offer instant, nearly-free cross border payments.

Sphinx.chat

Sphinx.chat is a chat application and live streaming service via which users join 'tribes' and send micro-payments to support their favorite content creators, creating incentives for creators to grow organic followings without having to rely on sponsors. 

Zebedee

Zebedee brings micro-payments to online gaming. Their Lightning wallet allows users to send satoshis (or "sats," the smallest unit of a Bitcoin) to each other in virtual worlds.

Impervious.AI

Impervious.AI provides a popular and easy-to-use API for developers to build applications on top of Lightning.

What This Says About Bitcoin 

In recent years, a popular narrative has emerged that Bitcoin is merely an excellent store of value, but not suitable for widespread use on a daily basis. Lightning Network adoption directly challenges this narrative via a dynamic network of innovative payment solutions and real-world applications that is being built using Bitcoin's second-layer technology.




Joshua is a writer and Bitcoin enthusiast. His intellectual interests include geopolitics, philosophy and history. When not writing he enjoys travel and watching basketball.