Bitcoin Lightning Network Capacity Reaches All-Time High

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The Bitcoin community celebrated that the Layer 2 payment system reached a total of over 3,400 BTC locked. This equates to approximately $141 million.

Bringing near-zero fee BTC payments, Lightning adoption has grown significantly over the past year. During the same period, bitcoin became much more widely used as a network and investment asset by investors and large corporations as the crypto bull run continued.

However, growth has slowed since the November crypto crash. Moreover, the total capacity of Lightning is still tiny compared to Bitcoin’s $790 billion market capitalization.

In fact, users hold more Bitcoin on the Ethereum blockchain as Wrapped tokens, with the market capitalization of Wrapped BTC being $10 billion.

How it works?

The Lightning Network is an off-chain network that allows users to make bitcoin payments at near-zero fees. Launched in 2018, it aimed to solve Bitcoin’s scalability problem.

It does this by allowing users to lock an amount of Bitcoin onto the network. They then use its equivalent to make many small off-chain payments.

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

Some Concerns

However, there are some issues with the network. First, it does not completely eliminate the cost of Bitcoin transactions. This still imposes the cost on users to open a lightning channel, which must be on-chain.

Importantly, it exposes users to Bitcoin price risks. Specifically, the network forces users to lock their coins.

The violent swings in BTC prices could be one of the reasons for the slow growth of the network.

Block and light

In January, Cash App integrated the Lightning Network, bringing fee-free bitcoin payments to the app. This integration was made possible through Block’s open-source Lightning SDK.

Block (formerly Square) is the parent company of Cash App. On Tuesday, Block CEO Jack Dorsey reaffirmed his commitment to open source software and open protocols like Bitcoin.

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