Bitcoin Lightning Network growth is organic, coming from real-world adoption
Bitcoin’s Lightning Network (LN) capacity recently surpassed an all-time high of 5,000 BTC.
The Lightning Network is a neutral protocol built on top of Bitcoin and currently it does not have a “native” token attached to it like many decentralized finance platforms.
Although the Lightning Network’s total liquidity is less than 0.5% of the ETH in DeFi contracts, the uptrend in Bitcoin’s LN capacity versus a downtrend in the amount of ETH locked in smart contracts is encouraging for LN development.
While the liquidity on the LN has been rising consistently, the number of channels on the peer-to-peer network dropped drastically in November following the FTX collapse. It could be due to an exodus of miners operating LN nodes besides running mining clients.
However, the likely end of miner capitulation and the rise of Bitcoin-based applications like NFTs could mark an end to LN channel capitulation. Since the start of 2023, over 2,000 new channels have been added to the network.
A Valkyrie Investments report stated that LN adoption was picking up speed in emerging markets like South America and Africa, primarily due to efforts of the LN mobile payment application, Strike.
In December 2022, the firm launched an LN-based remittance service in Africa. The service offers no-cost transfers from the U.S. to Africans in Nigeria, Ghana and Kenya. Later, Strike announced a similar program in the Philippines.
More recently, the firm announced dollar payments using LN, where users can potentially send dollars from the Strike’s cash balance to savings and VISA-enabled accounts. The app will convert USD to BTC in the background and convert to USD at the destination. Since LN is fast and cheap, the risk due to Bitcoin’s price volatility is
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