Bitcoin: boom of the Lightning Network
It was to be expected: due to the congestion problems on the Bitcoin mempool, there is a real boom in transactions over the Lightning Network.
This is notably reported by Bitfinex, which is one of the first crypto exchanges to implement BTC transactions via LN.
The exchange did this back in 2019, when LN was very little used.
Back then there were less than 5,000 nodes and less than 32,000 channels globally, while today there are more than 18,000 nodes and channels have jumped to almost 80,000.
The fact is that with the congestion in the memory pool, the cost of fees for individual transactions has skyrocketed and the average time to validate transactions has increased.
Suffice to say, there are currently more than 400,000 transactions in the mempool waiting to be validated, compared to roughly 600,000 validated transactions per day.
The solution: Lightning Network
It is a solution to Bitcoin’s mempool overload problem.
It’s the Lightning Network, which is Bitcoin’s main Layer-2, enabling instant transactions at almost negligible cost, and currently has no real capacity limits.
In fact, 18,000 nodes are capable of handling far more transactions than the miners on the chain can handle, and even the huge demand there is these days.
If all the transactions in the mempool could take almost 24 hours to validate, those with LN can be validated in a matter of minutes, or a few hours at most.
Furthermore, of the 400,000 transactions still in the mempool, some will certainly not be validated within 24 hours due to the low fees, but if they had been done with LN, they would most likely have been done already.
Boost activity on the Lightning Network
Bitfinex CTO Paolo Ardoino so:
“Lightning is well positioned to ease congestion issues on the Bitcoin network. At Bitfinex we saw 11,000 transactions in the last 30 days and I expect this to only grow. We need more hubs and more hub users to push for Lightning to take advantage of faster speeds and at a much lower cost Blockstream’s Liquid network is also a good secondary layer that can help in situations where the main chain is congested“.
On the one hand, these figures show that there is indeed a boom in the use of LN, but on the other hand, they clearly indicate that there is still a very limited use overall.
On the other hand, if it was used massively, the Bitcoin mempool would probably not be overloaded.
In fact, BTC transactions via LN do not go through either the blockchain or the mempool, so if this protocol were to be used, the mempool could also be emptied very quickly.
It is also important to remember that precisely because LN transactions do not go through the public Bitcoin blockchain, it is not possible to have public statistics on them.
Only the owner of a node can determine how many transactions go through their node, and this information is not public unless the node owners disclose it.
The still limited use of LN
Given all this, the question arises as to why the use of LN is still so limited.
First, Ordinals, the Bitcoin inscriptions that cause most of the congestion, must go through the blockchain and cannot be exchanged via LN.
Furthermore, it is not possible to trade BTC via LN with traditional wallets: you need special wallets to which you have to transfer part of your BTC.
Finally, to use an LN wallet, a channel must be opened, and opening an LN channel requires a transaction on the blockchain. Currently this slows down the creation of new LN channels.
Therefore, we will have to wait a while before the use of the Lightning Network becomes widespread, hoping that bitcoin’s mempool problems do not worsen in the meantime.
It’s worth noting that the number of transactions waiting on the mempool has actually decreased since yesterday, so for now the problem seems to be slowly abating.
Meanwhile, however, bitcoin’s average fee per transaction has significantly exceeded Ethereum’s for the first time since July 2021.
