Africa Switches to Lightning, Stablecoins as Bitcoin Transaction Fees Soar

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Bitcoin (BTC) users in Africa are increasingly turning to the Lightning Network and stablecoins as transaction fees hit their highest level in about two years.

The Lightning Network is a layer built on top of the Bitcoin network to process transactions faster.

Many across the continent have already used these tools, so they haven’t necessarily been bothered by the rising fees, but instability has also been noticed even in wallets that use the Lightning Network, some said.

Due to the rising fees, there has been a shift in demand from customers who now prefer to transfer their trades via stablecoins such as USDT, while low volume traders now prefer flash trades over the network to base layer transactions, said Heritage Falodun, the founder. Africa-focused OTC liquidity provider Digioats.

The dramatic increase in transaction fees is at least partly due to the introduction of Ordinals on Bitcoin, a protocol that allows the creation of non-fungible tokens and BRC-20 tokens, associated with certain memecoins, on the Bitcoin network. .

Daily bitcoin users for transactions such as cross-border payments and remittances have been greatly impacted, said Lorraine Marcel, Kenya-based founder of Bitcoin DADA, a project aimed at educating women in Africa about crypto. The majority of the African population is unfamiliar with the lightning network and most educators prefer to get newbies on the unchain network as it offers self-care, she said.

While the absolute amounts of transaction fees may seem low to Westerners, for those in African countries with weak economies, it’s a significant burden, said Mary Imasuen, based in Lagos, Nigeria, host of the Bitcoin Gamer Chat podcast. .

Traders are also affected. Most of the exchanges that operate in Africa do not yet have lightning…many traders are still waiting for trades from three days ago to confirm… [while] some transactions are too expensive to settle, Machankura Wallet’s Kgothatso said in an interview with CoinDesk.

Those running Bitcoin nodes also face challenges. Opening a channel to the node now costs more than before due to bitcoin fees, Imasuen said. From the perspective of those in Africa, where our currency is constantly devalued, this cost is not negligible, she said.

Ultimately, this could lead to less network decentralization. Fewer ordinary people will be able to run efficient nodes without using a well-funded LSP [lighting service provider]which could increase centralization on layer 2, said Nikolai Tjongarero, Bitcoin Educator, founder of EasySats and BTC Mining Namibia.

Even those already using the Lightning Network have encountered difficulties as transactions have become congested or liquidity has dried up between service providers.

Every Monday for a year and a half, I’ve paid the salaries of 11 people working for Bitcoin Ekasi using lightning, and today was the first time in over a year that the process didn’t go through. went smoothly, said Hermann Vivier, president of South African Bitcoin Ekasi, a startup aiming to create a circular bitcoin economy. I had to use 4 different lightning wallets because the channel liquidity between different wallet providers had dried up.

Users of the Muun wallet, which uses both Bitcoin and Lightning layers to process transactions, have been charged high fees, especially those who use it for payments in the South African Pick N Pay blockchain. , said Kgothatso. Congestion on the mempool means trading in the Muun wallet is expensive, with users having to foot the bill, Kgothatso added.

Despite all of these issues, many in Africa view this fee hike as a potentially net benefit to adoption, as it accelerates the move to Lightning Network integration and other solutions.

Marcel hopes the fee increase is only temporary, but adds that it’s a revelation.

In a way, that’s a good thing because it forces people to use lightning despite the short-term inconvenience, Vivier said.

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