After the massive increase in bandwidth in 2022, the Bitcoin Lightning network has had a weak start into the new year. According to a report by Arcane Research, the growth in the Lightning Network’s bandwidth, or the number of Bitcoins (BTC) opened in channels, has slowed.
The Lightning Network went from 1,000 BTC to 3,000 BTC in just eight months in 2021, hitting the 3,000 BTC mark in mid-October.
As the network continues to reach all-time highs, growth is slowing. The total BTC locked to the network peaks just past the 3,500 BTC mark and is causing controversy and discussion on social media.
Let me remind you that the Lightning Network is one answer to the scalability problem of the Bitcoin protocol. Lightning allows instant and very low off-network transactions; However, this requires Bitcoin to be opened in the payment channels distributed on the Lightning nodes.
Lightning Network activity increased in 2021, mainly due to El Salvador taking over the entire country and Twitter incorporating Bitcoin Lightning staking. An October report from Arcane Research predicts that there will be 700 million users of the Lightning Network by 2030.
So why will growth slow down in 2022? The Bitcoin LightningNetwork + Twitter account says that platforms like Umbrel (Easy-to-Configure Node and Lightning Node Service) sent primordial growth to the moon. Of course, due to the S-shaped growth, a plateau had to be reached.
Danny Scott, CEO and co-founder of CoinCorner, the UK’s largest Lightning exchange, told Cointelegraph:
“I don’t think we’re ever seeing a plateau of the Lightning Network. We’ve had a massive increase in growth thanks to the news last year, and now the growth looks much more vibrant.”
On the other hand, he noted the plateau of S-curve adoption on the one hand, “December is the holiday season for many around the world and often when the bitcoin industry slows down.”
Renee Beckhardt, co-author of Mastering the Lightning Network, explained that slowing growth could actually benefit Bitcoin. chirp:
“Due to the fact that the number of nodes can only grow with channels, and channel growth is constrained by the limits of Bitcoin storage, we can only have a very short period of exponential growth. After that, we will be linear at best.”
Looking to the future, lightning could strike twice on the Bitcoin Layer-2 solution. Lots of updates and news could fuel growth, such as the US mobile payment service Cash app, which has implemented Lightning Network integration for its 30 million users.
In fact, improving user experience and simple and fast integration of existing apps and exchanges can come as a shock to the web. Scott highlights the situation:
“When we introduced Lightning Addresses (such as Danny@CoinCorner.io) to make it easier for our customers to receive Lightning payments, we saw a massive increase in usage.”
Arcane Research’s article with CoinCorner agrees that the Lightning Network may enter a new phase of growth – and the best may not have arrived yet.