Lightning Network Capacity Set New Peak in April – Here are Other Notable LN Updates

Existing as a second-layer protocol on Bitcoin, the Lightning Network (LN) typifies an off-chain scaling solution of sorts that allows for fast and cheap transactions by creating payment channels between two parties that can be used to conduct transactions. These channels are established by initiating transactions on the blockchain and anchored by committing an amount of Bitcoin. When the payment channel opens, the parties can exchange Bitcoin (BTC), with each transaction only recorded between the pair. The final state of the payment channel is then broadcast to the Bitcoin network, effectively settling the transaction on the blockchain.

Bitcoin's Lightning Network

The LN conceptually network congestion by conducting transactions off-chain, which reduces transaction fees and increases the speed of transactions. It also allows for increased privacy, as transactions can be conducted off-chain without being publicly recorded on the Bitcoin blockchain. The perks of this new network of payment channels make it ideal for micropayments and similar small transaction use cases.

Lightning channels additions/closures per block. Source:TXStats

Though the LN has only been adopted as a rough and ready solution for the most part thus far, its potential has been hailed as the missing jigsaw piece to make Bitcoin an all-encompassing ecosystem. The LN has tracked significant milestones since it was first proposed under a white paper titled ‘The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments' published in 2015. The release of Lightning Network Daemon (LND) version 0.4.0-beta later in 2018 marked the launch of its first version on Bitcoin's mainnet. In recent years, developers have added more updates and improvements to the protocol to make it a go-to solution for merchants and Bitcoin users.

To learn more about the Lightning Network, check out our Lightning Network guide.

Channel capacity surpassed 5,600 BTC in April

The Bitcoin blockchain processes up to 5 transactions per second (TPS) which is comparatively lower than Ethereum and other recent blockchain projects, hence the need for LN. Thus far, LN has stood out as a reliable option to transact Bitcoin (mostly in Satoshis) at a significantly reduced fee, evidenced by accelerated growth in its channel capacity this year.

The state of LN

TXstats data shows that the layer's capacity has been consistently increasing in April and reached all-time highs of 5.67K BTC earlier this month.

LN is significantly cheaper than MasterCard and Visa

In a recent report, blockchain and analytics platform Glassnode noted that the LN offers users a much more convenient transaction experience than legacy payment systems. The likes of Visa and MasterCard are at least 1000 times more expensive when transacting than when navigating via the LN. James Check, head analyst, observed that the median fee for sending 1 BTC via the Network is 3,000 Satoshis, equal to $0.84. This is barely 0.003% of the value of one token at the current price of $29,285.

Dylan LeClair separately highlighted on Nostr that the fee rate for transfers over the LN is significantly lower than what major credit card companies charge – the median fee rate on the LN is just 0.003%, a stark contrast to alternative rates of between 1.5% and 3.5%. Despite its promising utility, the layer two protocol has thus far struggled to attain mainstream adoption. The stunted adoption of the LN protocol has mostly been chalked up to the complexities in the network.

Lightning Labs releases new version of node management tool suite

Last month, Lightning Labs, one of the development teams behind LN, communicated the latest release of its Litd node management tool. The San Francisco-based startup manages Lightning Terminal, a tool that simplifies Lightning node management. The latest upgrade shipped with automation fee management and better control of Lightning Node Connect (LNC) permissions as notable features. It also brings custodial off-chain accounts, among other features whose incorporation was requisitioned mostly by the developers and node operators.

“Litd bundles the base version of our land Lightning implementation with liquidity services such as Loop and Pool, a web-based node management UI with Terminal, the ability to remotely connect nodes with Lightning Node Connect, and a set of accounting features with Faraday into a single software package,” Michael Levin, Head of Product Growth, remarked on the update.

Levin reiterated that onboarding more people to the network remains the priority while highlighting ‘liquidity' as one of the biggest UX setbacks faced by those looking to try the LN out. In context, the update will deliver a better navigation experience to users seeking to interact with the Order Board Pool.

Lightning Labs isn’t the only Bitcoin-focused development team ramping up efforts to make the layer two iteration on Bitcoin easier to use. Enterprise-serving infrastructure company Lightspark earlier this month announced a ready platform aimed at onboarding businesses to Lightning.  Block subsidiary Spiral also previously revealed plans to improve the processing and handling of payments made on Bitcoin. Specifically, further advancement of Lightning Development Kit (LDK), an LN implementation whose roadmap focuses on improving payments on the Bitcoin blockchain. LDK's lightweight but high-performance aspects allow easy integration of Lightning features to wallets.  In a Twitter Spaces session on Mar 21, the project team presented and spoke on the upcoming tech improvements to the Lightning Dev Kit.

Coinbase chief says the exchange will add support for the LN

In a separate April 9 Twitter thread, Coinbase CEO Brian Armstrong blamed an auto-delete feature that clears his tweets after a while when queried about his seeming lack of support for the LN. In reply to Bitcoin bull Wicked, Armstrong praised the settlement layer as something great. He added that the exchange plans to integrate it soon, though not giving any more information. If Coinbase pursues this plan (though it could take a while, according to some skeptics), it will join the ranks of OKX, Bitfinex, and Kraken. The latter said in December 2020 that it was working on adding the ability to deposit and withdraw Bitcoin through the Lightning Network on its exchange platform.

MicroStrategy converts executive corporate emails to receive Satoshis via the LN

Earlier this month, MicroStrategy and Bitcoin diehard Michael Saylor, who serves as the Executive Chairman of the business intelligence and analytics firm, revealed he leveraged the LN’s Lightning Address protocol to integrate his work email address for Bitcoin transactions. The protocol works such that users can convert a standard Lightning invoice or payment request into a unique identifier, such as the email in this case, rather than having to deal with clunky wallet addresses. Per his tweet, the billionaire said he’d been receiving 21 Satoshis from various persons via his corporate email address.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.