The Bitcoin Lightning network is growing faster than you think
Use of the Lightning Network is growing faster than available public statistics show, according to the Norwegian crypto research firm. Arcane research. As the network is used more and more for everyday purposes, we could be on the way to adopting Bitcoin (BTC) which will see hundreds of billions of Lightning transactions every year by 2030, they estimate.
The report, powered by payment company BTC OpenNode and titled The state of lightning, aims to provide “the most comprehensive overview of Lightning Network usage ever,” through the company.
One of the main points made in the report is that Lightning usage is actually growing faster than public metrics show. Statistics like total channel capacity and number of nodes show that the Lightning Network is growing rapidly.
According to 1ML data, the number of Lightning nodes increased by 5% in one month, reaching almost 27,600, while the number of channels is up by almost 8%, to approach 75,500. At the same time, LN’s capacity jumped 26%, to 2,999 BTC, or $ 152 million.
While the Lightning Network launched in 2018, usage growth accelerated dramatically in late 2020, embarking on a steep upward trajectory since then and seeing its growth turn parabolic in September 2021. That’s the result. the introduction by El Salvador of bitcoin as legal. RFP, powered by others enabling Lightning payments, including Paxful and Twitter.
“However, public measures do not show the true extent of the growth in usage,” said the company, which found that the wallet’s payment volume increased “far more than the most cited growth measure,” the total capacity of the canals during the past year “. It increases by 20% per month from January to August 2021, the equivalent number for the capacity of public channels being 10%. In September, the volume of payments almost doubled compared to a 26% increase in the capacity of public channels.
Growth in payment volume (USD) of wallets on the Lightning network vs growth in public capacity (BTC). Monthly compound.
Additionally, “Lightning usage is shifting from dominance of online services to everyday use. Statistics from Arcane Research’s Lightning Wallet show that the composition of payments changes as new users access Lightning payments. While payments for online services like commerce and gambling dominated the payment volume, “September showed that this was changing rapidly, as personal transfers and payments for more typical everyday use like payments. merchants and gift cards have risen to double the rate of online services ”.
According to Elizabeth Stark, CEO of Lightning labs, a software developer that powers the Lightning Network, “Lightning already enables people to send money instantly through Internet-native global transactions, with immense opportunities in emerging markets,” adding that they are ” on the verge of bringing bitcoin to billions with Lightning. “
The Lightning Network is touted as a solution to Bitcoin’s slow speed, and without compromising network security – allowing people to send fractions of a bitcoin at near instantaneous speed at the same time.
364 billion Lightning transactions per year by 2030?
But going back to the adoption wave that started with El Salvador, Arcane Research also looked at the potential impact of this wave on Lightning Network activity.
“The adoption of Broad Lightning will likely take a while, but usage growth is likely to be exponential when bitcoin gains a foothold. In a potential Lightning adoption scenario in El Salvador, nearly 90% of the growing population will have access to Lightning payments by 2026, ”the researchers said.
In addition, they estimate that the monthly volume of household spending and remittances on the Lightning Network will reach some $ 650 million and 20 million transactions each month.
A potential scenario for using Lightning from household spending and remittances in El Salvador to 2030.
Then, if that is successful, other countries are likely to follow El Salvador, mainly those with limited banking access, inflated national currencies, heavy reliance on remittances, and heavy reliance on the US dollar. Countries that fit this description, according to Arcane Research, have a combined population of 850 million. If 10% of them adopted BTC before 2030, that would represent 50 million more Lightning users.
“By 2030, these users will be late [USD] 17 billion annualized Lightning payment volume and over 1.2 billion Lightning transactions through household spending and transfer payments, ”the report says.
A possible scenario for the use of Lightning from household spending and remittances to other poorly banked and dollarized countries until 2030.
Adoption should then continue beyond Lightning’s role as a medium of exchange in poorly banked countries. Arcane Research found that while game rewards and winnings only amounted to an estimated $ 4000 inbound transaction volume, they did so out of a “whopping” 189,000 transactions, suggesting an average transaction size of 2 cents.
“These transactions clearly demonstrate the ability to make tiny payments over the Lightning Network, potentially allowing users and businesses to settle almost instantly and thus mitigate counterparty risk,” the report said.
The researchers concluded that,
“The Lightning Network and the ability to make instant micropayments will most likely change the way we pay for certain services. We are already seeing the first steps, but the alternative to cash flow will revolutionize many popular services in the future. “
The number of global users for some services where Lightning payments can become an alternative payment method includes 3 billion in games, 3 billion in video (1 billion for paid services and 2 billion for non-paid services) and 500 million in audio. “We then end up with around 700 million paying users for games, video and audio through the Lightning network by 2030.”
Users of paid games, video, and audio services with Lightning.
Additionally, based on a conservative estimate of one hour used per day on these services and an average of 25% of that time spent consuming services with Lightning payments, the company estimates “no less than 364 trillions of Lightning transactions per year by 2030 ”.
The use of lightning is global
The report further notes that while the development and nodes are primarily based around the Western Hemisphere, the use of Lightning is global, “and users in emerging markets are clearly present.”
Data from a crypto-only company that offers gift cards Bitrefill suggests that users in developing countries prefer to use Lightning payments over chain payments. Salvadoran, Brazilian and Nigerian users are the most frequent users of Bitrefill’s Lightning integration, followed by users from South Africa, Poland, Italy and Russia.
Until August, according to company estimates, the aggregate values of inbound and outbound transactions were close to $ 5 million for commonly used wallets combined. Half is used for payments for goods and services, totaling $ 2.4 million in August.
But “volume isn’t the only measure of Lightning usage,” they said. “If we look at the number of transactions, the picture changes quite dramatically. “Incoming payments represent only a small part of the value of transactions, but” constitute the bulk of the volume in terms of the number of transactions. ” There were almost 250,000 inbound transactions in August, in addition to just under 45,000 transactions between portfolios and 60,000 payments for goods and services.
– Technically capable bitcoin has other mass adoption challenges to solve
– El Salvador will be a serious test for Bitcoin’s layer 2 networks
– How Bitcoin’s Lightning Network Works Under the Hood
– Mastering Lightning with Andreas M. Antonopoulos & René Pickhardt