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Bitcoin Lightning Network Growth Is Entirely Organic

Image Source: tungtaechit / Shutterstock

The assimilation of Bitcoin’s Lightning Network (LN) has recently exceeded its peak capacity of 5,000 Bitcoin (BTC).

The Lightning Network operates as a neutral protocol layered atop Bitcoin and currently lacks an inherent token, unlike many decentralized finance (DeFi) platforms.

Even though the total liquidity on the Lightning Network is still below 0.5% of the Ether (ETH) locked in DeFi contracts, the increasing trend in Bitcoin’s LN capacity compared to the decreasing amount of ETH secured in smart contracts presents a positive outlook for LN’s evolution.

While liquidity on the LN has steadily increased, the number of channels within the peer-to-peer network experienced a significant decline in November following the collapse of FTX. This drop could be attributed to miners who were involved in running LN nodes in addition to their mining operations.

However, with the potential conclusion of miner capitulation and the emergence of Bitcoin-based applications like nonfungible tokens, LN channel capitulation might come to an end. In 2023, over 2,000 new channels have been integrated into the LN.

A report from Valkyrie Investments indicates that LN adoption is gaining momentum in developing regions such as South America and Africa, primarily due to the efforts of the LN mobile payment app Strike.

In December 2022, the company initiated an LN-based remittance service in Africa offering fee-free transfers from the United States to individuals in Nigeria, Ghana, and Kenya, with a similar program subsequently introduced in the Philippines.

Moreover, Strike recently unveiled a feature enabling dollar payments via LN, allowing users to transfer dollars from their Strike cash balance to savings and Visa-enabled accounts. The app manages the conversion from U.S. dollars to BTC in the background and then reverts to dollars at the destination, leveraging LN’s speed and cost-effectiveness to minimize risks from Bitcoin price fluctuations.

Comparatively, international payments from the U.S. can incur fees of up to $45 per transaction and endure delays of hours or even days. Consequently, users may opt for Strike-based payments over traditional remittance channels.

According to a recent analysis by Marty Bent, LN payments have surged this year on prominent Lightning Network wallets, including Wallet of Satoshi. Additionally, Podcasting 2.0, a podcast platform that accepts LN payments, observed an increase in tips conveyed to content creators.

Nostr is Accelerating LN Adoption

Another factor driving LN adoption is the introduction of Nostr. Described on the protocol’s GitHub page as a straightforward, open protocol facilitating global, decentralized, censorship-resistant social media, Nostr enables the construction of social media applications.

One such platform, Damus, a competitor to Twitter, is constructed upon Nostr and is accessible through iOS and Android applications. The notion of an unrestricted, complimentary social media network resonates strongly within the crypto sphere, with Bitcoin visionaries like Jack Dorsey and Adam Back openly supporting Nostr.

In addition to shared ideologies, Nostr can potentially escalate LN adoption as Damus has integrated various LN wallets such as Wallet of Satoshi, Strike, BlueWallet, among others. Per insights from LN analyst Kevin Rooke, more than 600,000 users have enrolled in Nostr, potentially facilitating user onboarding to LN, with Nostr supporting the Bitcoin payment network through Nostr Zap.

While LN does not possess a native token, there exists a prospect for LN nodes to earn fees for facilitating transactions and providing liquidity; currently, however, these earnings are minimal. Consequently, the Lightning Network’s growth appears to be spontaneous and is poised to evolve into the primary global payment network, as predicted by eminent figures within the field.

The opinions expressed in this piece are solely those of the authors and do not necessarily represent the views of Cointelegraph.

This article does not offer investment advice or recommendations. All investment and trading activities involve risks, and readers are advised to conduct their own research before making decisions.

Image Source: tungtaechit / Shutterstock

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