If this trend continues, Bitcoin could grow in the coming years

Although Bitcoin (BTC 1.39%) often touted as a superior form of money and a prime resource for storing wealth due to its scarcity and decentralization, it has some shortcomings. The most glaring shortcomings are the high cost and slowness of sending small transactions.

When you send these smaller transactions, it’s not uncommon for the transaction fee to be larger than the transaction itself. This has been one of the most well-known obstacles that have prevented Bitcoin from becoming a viable option for everyday purchases such as a cup of coffee or a meal at a restaurant.

However, this may be slowly changing.

Bitcoin is getting some help

In 2018, developers released a solution called the Lightning Network that would help reduce these high fees and slow speeds for smaller transactions. The details of how it works can be a little complex, but the most important thing to know is that with the Lightning Network, transaction speeds can increase from just 10 per second to more than 1 million per second and cost only a fraction of a penny.

In its infancy, the growth of the Lightning Network was slow, but in 2021 the network exploded as Bitcoin climbed to an all-time high of nearly $69,000 and users looked for cost-effective solutions to send and receive Bitcoin.

However, since peaking in 2021, Lightning Network has remained impressively resilient in the current bear market and has actually continued to grow.

On February 26, the Lightning Network achieved a new all-time high in network capacity. This metric measures the amount of Bitcoin locked in the network and acts as a proxy to measure liquidity. The thinking goes that the greater the liquidity, the greater the capacity of the network to process larger transactions faster and cheaper.

We can see this phenomenon in action when we take a look at the median base fee on the network. Despite Bitcoin’s price fluctuating, there is a clear and distinct trend of the median base fee falling over time. At the end of 2022, it reached an all-time low of $0.00000016. Talk about cheap.

The beginning of a new era

Considering that the Lightning Network has continued to flourish even in the midst of this crypto winter, there is considerable reason to believe that this growth will be sustained should a bull market occur. As such, the narrative that Bitcoin is too expensive and slow to use for everyday payments is likely to disappear.

Should the Lightning Network continue on its current growth trajectory, it could lead to Bitcoin truly becoming a superior form of money that can be used not only as a store of value, but also an attractive means of payment.

Although some consider it already in the upper echelon of all cryptocurrencies, the combination of Bitcoin’s use case as a long-term investment and growth of the Lightning Network could solidify Bitcoin’s position as the premier digital asset for years to come. Considering that Bitcoin’s price is still down more than 70% from its all-time high, an investment today seems almost too good to be true.