One of the largest Bitcoin Lightning Network (LN) node operators, River Financial, recently posted a report on this second-layer payment solution. Previously conceived as an experiment used by savvy BTC holders, the LN is quickly becoming a key component in this blockchain’s ecosystem and its potential ticket into the mainstream.
The report defines the LN as a second-layer Bitcoin solution that enables users to send and receive transactions off-chain, “without needing to wait for on-chain settlement”. This solution was created to improve BTC’s payment scalability by allowing entities to quickly transact in small amounts of the cryptocurrency without relying on block settlement.
The LN operates with entities called Lightning Channel, the nodes that support the network and allow two users to execute a transaction. As seen in the chart below, the propagation of LN channels has been increasing since late 2018.
In the following year, the second layer Bitcoin payment solution saw a massive spike in its unique channels. These stood at 25,000 followed by a long period of consolidation and slower adoption.
However, in 2021 adoption began to spike once again allowing unique LN channels to reach over 90,000 with an upside trend aiming at 100,000. In less than one year, these entities went from around 50,000 to their current levels.
This growth was probably supported by the COVID-19 pandemic and the people’s demand for fast, low-cost, payment methods with global reach.
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At the same time, as Bitcoin LN channels increase, its payment capacity adheres to a similar trajectory. In 2019, the second layer solution had less than $50 million in capacity or less than 1,000 BTC.
This capacity also consolidated between then and 2021. On this year, the LN’s capacity spiked to over $200 million at its peak, when the Bitcoin price…
