Bitcoin’s Lightning Network (LN) capacity recently surpassed an all-time high of 5,000 bitcoins (BTC).
The Lightning Network is a neutral protocol built on top of Bitcoin and does not currently have a “native” token attached to it like many decentralized finance (DeFi) platforms.
Although the total liquidity of the Lightning Network is less than 0.5% of Ether (ETH) for DeFi contracts, the upward trend in LN’s bitcoin capacity versus the downward trend in the amount of ETH locked in smart contracts is encouraging for LN’s development.
While liquidity on LN has been steadily increasing, the number of channels on the peer-to-peer network dropped drastically in November following the collapse of FTX. This could be due to the exodus of miners running LN nodes in addition to running mining clients.
However, likely the end of the miners’ capitulation and the rise of bitcoin-based applications such as non-fungible tokens could spell the end of the capitulation to the LN channel. Since the beginning of 2023, more than 2,000 new channels have been added to the network.
Report by Valkyrie Investments states that LN adoption is picking up in emerging markets such as South America and Africa, largely due to the efforts of mobile payment app LN Strike.
In December 2022, the company was launched remittance service based on LN in Africa. The service offers free transfers from the United States to Africans in Nigeria, Ghana and Kenya. Later, Strike announced a similar program in the Philippines.
Recently, the company announced dollar payments using LN, where users can potentially send dollars from their Strike cash balance to savings and Visa-enabled accounts. The app will convert US dollars to BTC in the background and convert to dollars at the destination. Since LN is fast and cheap, the risk due to Bitcoin price fluctuations is minimal.
The cost of international payments from the US can be as high as $45 per transaction, with transfers taking hours or sometimes days. Thus, users may begin to prefer Strike-based payments over traditional transfer channels.
A recent report from Marty Bent found that LN payments have increased this year on one of the best Lightning Network wallets, Wallet of Satoshi. Additionally, Podcasting 2.0 – a podcasting platform that accepts LN payments – has also seen an increase in tips sent to creators.
Related: Retail giant Pick n Pay accepts Bitcoin in 1,628 stores across South Africa
Nostr strengthens the adoption of LN
Another factor influencing the adoption of LN is the launch of Nostr. According to the protocol’s GitHub page, Nostr is a simple open protocol that enables global, decentralized, censorship-resistant social media. The protocol allows social media applications to be built on top of it.
Damus, a Twitter competitor, is built on Nostr and has an iOS and Android app. The idea of an open, free social network resonates strongly in the crypto space, with Bitcoin pioneers like Jack Dorsey and Adam Back having strongly supported Nostr.
In addition to their similarities in ideology, Nostr can support LN adoption as Damus has integrated various LN wallets such as Wallet of Satoshi, Strike, BlueWallet and others. According to a report from LN analyst Kevin Rook, it has more than 600,000 users he signed up for Nostr. This could help users on board LN as Nostr supports Bitcoin payment network through Nostr Zap.
While LN does not have a native token, there is the possibility that LN nodes earn fees for facilitating transactions and providing liquidity. However, in the current state, the earnings are negligible. Thus, Lightning Network’s growth appears to be organic and well positioned to become the leading global payment network – as noted by prominent figures in the field predicted.
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