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Lightning Network Capacity Reaches All-Time Maximum

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While the price of BTC has gained 14% in one week, the Lightning Network (LN) has reached a new high. Now, the network has 3,442 BTC locked up, or about $146 million at current exchange rates.

According to the 1ML website, current capacity has grown by 4% over the last 30 days. The number of nodes running LN also grew and now exceeds 34,000 nodes, up 5.65%. The network’s channels grew 2.7%.

LN numbers.  Source: 1ML.

Lightning adoption has increased dramatically in the past year. During the same period, BTC has become significantly more used both as a currency and as an investment asset.

However, growth has been slowing since the market crash in November. Furthermore, LN’s total capacity is still minuscule compared to BTC’s $790 billion market cap.

In fact, users hold more BTC on the ETH blockchain, through the Wrapped BTC (WBTC) format. In fact, the market cap of WBTC is valued at $10 billion, or $53 billion in current values.

How it works?

The Lightning Network is an off-chain network that allows users to make payments in BTC at near-zero fees. It was launched in 2018, shortly after Segregated Witness (SegWit) was passed, and aims to solve BTC’s scalability problem.

For this, LN registers its transactions without taking up space in the blocks, therefore the operations do not pay fees. Each user can create a channel and lock an amount of BTC on the network. They then use their equivalent to make many smaller, off-grid payments.

After the transactions are completed, the network sends the payments in an on-chain transaction. The results are significantly lower fees and less congestion.

Some concerns – and advances

However, there are some problems with LN. First, it does not completely eliminate the cost of transactions. Furthermore, channels need to be created on-chain, which further burdens users with the cost of opening a channel.

Above all, it makes users exposed to BTC price risks. As users need to lock down their cryptocurrencies, it becomes more difficult to sell in low moments. In this way, the channels are more suitable for those who are long-term holders.

But these “risks” are not holding back the development of the network. On the contrary: the Cash App payments service recently integrated the Lightning Network, bringing fee-free BTC payments to the app.

This integration was made possible by Block’s open source Lightning Development Kit, the company responsible for the application. Block CEO Jack Dorsey is a well-known LN enthusiast and proponent of improvements.

Last Tuesday (1), Dorsey reaffirmed his commitment to open source software and open protocols like BTC.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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