Lightning Network Capacity Reaches 5,000 BTC but Growth Stagnates
This is a segment from the Empire newsletter.
Overview of the Lightning Network
The Lightning Network is a layer-2 solution designed to facilitate fast and inexpensive Bitcoin transfers. Typically, Bitcoin transactions require about an hour for full confirmation, as they depend on six blocks being added to the blockchain, which occurs approximately every 10 minutes. The Lightning Network allows users to create payment channels where only the first and last transactions are recorded on the blockchain, enabling instant off-chain transactions between the parties involved.
Adoption in El Salvador
Lightning gained significant attention following El Salvador's adoption of Bitcoin as legal tender in September 2021. The government’s Chivo app and payment processors like OpenNode utilized the Lightning Network, resulting in widespread use among Salvadorans.
Despite initial growth, with Lightning capacity increasing from under 2,400 BTC to 3,300 BTC shortly after adoption, growth has stagnated over the past two and a half years. Currently, around 5,000 BTC ($500 million at $100k BTC) circulates within the network.
Early Innovations and Fun Applications
During late 2018 and early 2019, the Lightning Network saw a surge of creative applications, including:
- Pollo.feed, allowing remote feeding of chickens using Bitcoin.
- Satoshi’s World, where users could tag locations on Google Earth with graffiti visible to others.
Conclusion
While Bitcoin's increased seriousness may be seen as progress, it has led to a decline in the playful experimentation that characterized earlier uses of the Lightning Network. The landscape has shifted, making it unlikely for such innovative and whimsical applications to return.