Bitcoin’s Lightning Network Hit All-Time High Of Total Amount Locked

Bitcoin’s layer 2 payment system Lightning Network reached a milestone of over 3,400 BTC (~$145 million) locked.

The enabler of near-zero fee BTC payments, Lightning’s adoption has gone up massively over the last year. However, the growth has been slowing down since November’s crypto market wide correction.

Lightning’s total capacity is still tiny compared to the $806 billion in Bitcoin’s market cap. Interestingly, users hold more Bitcoin on the Ethereum blockchain as Wrapped tokens, with the market cap of Wrapped BTC standing at $10 billion.

What is Lightning Network?

The Lightning Network is an off-chain network that allows users to make Bitcoin payments at near-zero fees. Launched in 2018, with the purpose to solve Bitcoin’s scalability problem.

Users lock up a sum of Bitcoin on the network, and then use its equivalent to make many smaller, off-chain payments.

Once transactions are completed, the network sends out the payments on one on-chain transaction. The results are significantly lower fees and less congestion.

Concerns remain

While it all sounds very good, there are some issues related to the network. Firstly, it does not completely eliminate the cost of Bitcoin transactions, and saddles users with the cost of opening a Lightning channel, which has to be on-chain.

Perhaps most importantly, it exposes users to Bitcoin’s price volatility risks, because the network requires users to lock their coins up.

Steep price fluctuations on BTC could be one of the reasons for the slow growth of the network.