Bitcoin’s main second layer, Lightning Network, has recorded a resounding 1,212% growth in the past two years.
This is revealed in a recent report by River Research, dedicated specifically to LN.Â
The 45-page-long report analyzed several factors, such as the number of transactions, the total volume of transactions, the number of people using it, the category companies and the funding they have raised.
Summary
The growth of Bitcoin’s Lightning Network
The most significant growth is in the number of monthly transactions.
It should be mentioned, however, that there is no publicly verifiable data on this, as transactions via Lightning Network are not public and are not recorded on Bitcoin’s blockchain, so these are estimates.Â
During August two years ago, an estimated 500,000 transactions were made on LN. By August 2023, there were at least 6.6 million, an estimated increase of +1,212% in just two years.
This growth occurred despite a 44% drop in the price of BTC and a 45% reduction in online searches.
6.6 million transactions in one month equates to more than 200,000 transactions per day, or about one-third the daily peaks recorded over the same period on Bitcoin’s blockchain.
Currently an average of about 4.4 transactions are recorded per second on Bitcoin’s blockchain, while LN has risen to 2.5. Two years ago it was at only 0.2.
Note that the on-chain data are certain and verifiable, while the data reported by River Research are approximate default estimates.
Most transactions via LN would occur for online games, social media tips, and streaming.
In addition, the success rate for payments via LN was 99.7%, because sometimes no path is available to complete the payment if nodes do not have sufficient capacity.
Volumes
Of course, the volumes transacted are also only estimates, and since the overall average capacity of the Lightning Network in August was only 5,000 BTC, only about $78 million was transacted in one month.
This is still a very low figure, especially since instead on-chain volume is over $7 billion per day.
Then again, LN is mostly used for micro-transactions, while the average value of an on-chain transaction is even above $26,000. So on the one hand we have transactions of minimal amounts, averaging only $11.84, while on the other we have transactions of decidedly large amounts.
Be that as it may, as of August 2021 the monthly volume on LN was $12 million, so the increase in two years was 546%.
In total for 2023 a total volume of just under $1 billion is estimated.
Users
Although it is not possible to know precisely how many individual people have transacted BTC via Lightning Network, it is estimated that there were between 279,000 and 1.1 million active LN wallets as of August.
In total, however, 122 million LN-enabled crypto wallets would exist today.Â
In addition, activity via LN is fairly evenly distributed over 24 and seven days of the week, better than last year. This means greater adoption globally, although the number of nodes and channels, and network capacity, have remained stable.
Then again, Bitcoin adoption has been slowed by the bear-market, but at least it appears that LN node operators are professionalizing and also becoming more efficient.
Companies
The report mapped 173 companies in the Lightning industry into 28 categories.
As of 2018, these companies have raised $530.93 million in funding through the end of 2022, and there were 39 companies funded. This means that only 19% of Lightning companies have received funding.
Moreover, more than $428 million was raised in 2022 alone, which proved to be an exceptional year for raising funding for Lightning projects.
Still, this is an area that is still growing, and with much untapped potential.
It probably weighs somewhat on the unavailability of stablecoins, since it is mainly these in crypto, and not Bitcoin, that are primarily used for payments.
It should be remembered that the potential of KN goes far beyond what we to date are used to associating with Bitcoin.
