Bitcoin - River takes stock of the Lightning Network

It’s been seven years since the Lightning Network white paper was published by Joseph Poon and Tadge Dryja. River takes stock in its latest report.

Lignthing Network

THE report of River is based on data from node operators representing 52% of the public capacity of the Lightning Network (LN).

Nodes are servers that allow users to send and receive lightning payments. There were between 15,000 and 18,000 public nodes as of September 2023.

The data provided by Bitcoin Visuals, CoinMetrics, Mempool, Amboss And Glassnode different because it is difficult to map the entire network.

The companies that shared their data with River represent 29% of the 5,000 BTC on the lightning network and 10% of the network’s 70,400 channels. They come in particular from exchanges (River, Bitfinex), online games (THNDR) or even wallets (Wallet of Satoshi, Breez, Alby).

It appears that these nodes facilitated at least 6.6 million transactions for the month of August 2023 alone (213,000 transactions per day). The exact figure could be a multiple of this number if data on direct and private transactions were available.

This represents an increase of 1,212% from the 503,000 August 2021 lightning payments estimated by K33 (formerly Arcane Research). This is the equivalent of 2.5 transactions per second, compared to 0.2 transactions per second in August 2021.

Compare with the 4.4 transactions per second carried out on the Bitcoin network (on-chain). Thus, although the LN aims to compensate for the low transaction throughput of the Bitcoin network, it remains less used to date.

The equivalent of 78 million dollars was publicly channeled thanks to the 5000 BTC located on the LN. This is an increase of 546% from the August 2021 estimate of $12 million. On an annual basis, this translates to nearly $1 billion in volume. That’s seven times more money than the 5,000 BTC capacity of the LN network.

Estimated growth in transaction volume on the Lightning Network / Source: River
Estimated monthly growth in transaction volume on the Lightning Network / Source: River

Note that the number of nodes, channels and BTC of the LN network have remained stable over the past year. Which suggests that it is early adopters who are using the LN network more and more often.

The average transaction size on the public network is around 44,700 satoshis, or around $12. A more detailed analysis of the transactions shows the LN is actually used to carry out very small transactions whose amounts are lower than the transaction fees of the Bitcoin network.

The LN therefore fulfills its promise to enable low-value payments on the Internet. A quarter of transactions are less than 10 satoshis. Another quarter includes transactions of 10 to 1000 sats (between $0.002 and $0.2).

River estimates there are between 279,000 and 1.1 million monthly active users. Overall, between 1.8 and 3.7 million Lightning wallets have been downloaded. In total, at least 122 million wallets have the LN option (like Electrum). The flagship of lightning wallets is the French Phoenix.

Other interesting statistics, River the LN industry has a minimum of 173 companies. More than $530 million was raised by 39 of these companies between 2018 and the end of 2022. Including $428 million raised for 2022 alone.

And while we sometimes hear complaints that the LN network doesn’t work, River notes that its LN payments were successful in 99.7% of cases (out of 308,000 transactions) as of August 2023.

Failures are often linked to the inability to find a path with enough liquidity to complete the transaction. Another reason: the recipient’s “non-custodial” wallet is not online.

In sum, the primary use case driving LN transaction growth is online gaming. But also tips on social networks (Nostr with ~150,000 “ zaps » per month) and streaming. These categories account for almost a third of the total growth in the number of transactions.

River argues that the driving force behind LN’s future growth will be its adoption by more exchanges. Indeed, it is estimated that 70 to 80% of Bitcoin holders keep their funds on exchanges.

Twenty-six exchanges have integrated Lightning since 2018. Binance has and Coinbase intends to integrate, but many others have yet to announce anything.

Let’s end by emphasizing that the main function of bitcoin today is to be a store of value. River notes that only 11% of bitcoiners use it to make payments according to Binance.

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