Lightning network has been one of the most interesting developments in the Bitcoin protocol since its launch. It was first introduced back in 2015 as a layer 2 payment protocol on top of the Bitcoin Blockchain. Since then the protocol has undergone several improvements and adoption by the Bitcoin community.

The first implementation of the lightning network was launched in end of march 2018 by Lightning labs. So it has effectively been only two years since the beta launch of the first implementation after which we have seen several other companies and organizations.

Lightning network has some serious potential in terms of network effects as the usability and scalability of the network increases exponentially with increased liquidity in the network.

Various metrics to look out for:

Nodes

A lightning node is a hub to monitor the Bitcoin blockchain and also interact with other lightning nodes. Since it is a peer to peer network, each Lightning network node is responsible for keeping track of who has what in the channel.

According to the data from 1ML, Currently, there are over 11,600 nodes operating worldwide. Some of the top services using lightning include Bitrefill, Blockstream and tippin.me.

Channels

A lightning channel is opened between two nodes in the lightning network, once a channel has opened the sender and receiver can send as many transactions as they want. Channels are a very important metric as they fuel the network effects of lightning, the more channels there are the easier it is to send transactions.

According to the data from 1ML, currently, there are over 35,900 lightning channels. Top locations include Toronto, Ashburn and Paris.

Network Capacity

The lightning network capacity is the cumulative bitcoin capacity across all the networks. With increased network capacity more Bitcoins can be transacted on the network, currently, the cumulative capacity is over 885k Bitcoins (Just above $7 Million).

Note: It is actually very hard to know the exact capacity of the entire network since many channels maybe transacting in private, the current estimate only considers the public channels. Many apps have started to open channels that are not advertised to the public.

Even though the growth in the network has stalled for more than 3 months, the infrastructure being built around it is steadily increasing. But one has to note that the decrease in the network capacity is due to a single node shutting down a lot of channels (in part due to Bitcoin’s price volatility). This shows we are still very early on in the growth of the network and there is a lot of potential that is yet to be realized.

Some salient points to remember:

  • Businesses are yet to start accepting payments using lightning – lightning is a really good way for businesses especially e-commerce websites due to faster confirmation time.
  • Once the network passes its beta stage there are going to be a lot more companies that will start providing services since they are incentivized to do so.
  • There will be Micropayments use cases on the internet realized through the lightning network – especially in the gaming segment, take for example satoshis place – with as low as one satoshi you can draw a pixel on a public board. It captured the imagination of many users and proved out to be a popular application of lightning.
  • Exchanges and wallet providers will eventually integrate lightning for Bitcoin transactions – Prominent exchanges like Bitfinex, Hodl Hodl have already integrated lightning payments, other exchanges will likely follow.

If you are interested to use lightning network – check out our lightning enabled bitcoin wallet app HERE.

 

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