Bitcoin Scalability Solution in Peril as Lightning Network Capacity Declines by 4%
Lightning Network capacity has reportedly reduced by 4% in the last month. This is a major decline considering the network had a capacity for Bitcoins worth millions of dollars.
At press time, the capacity is only up to 1020 BTC while the number of channels is at 36,578 at a loss of over 5%. More disturbing is the fact that the number of new nodes has dropped by 15% in the last 24 hours.
This could imply a decreasing interest in the network which was designed for off-chain transactions in order to reduce the traffic of on-chain Bitcoin transactions. However, the number of new channels is up 27.22% in the last 24 hours while number of nodes and number of new nodes are up 4.36% and 1.25% respectively.
A decrease in the network capacity of the Lightning Network could have a huge negative impact on transaction speed especially now that a bull market is in view and transactions become very rampant. Already, the Bitcoin network transaction fees are skyrocketing due to several unconfirmed on-chain transactions.
LongHash reported that this is the first time ever that bitcoin transaction has gone over $4 since Q4 of 2017. While this may suggest a bull market, it has devastating effects on users which the Lightning Network was meant to solve.
Bitcoin fees are now over $4 per tx for the first time since February 2018
— LongHash (@longhashdata) May 17, 2019
The Lightning Network idea was not very popular at first but an exercise known as the lightning torch helped to publicize it greatly.
The exercise required that voluntary participants paid a certain amount to receive the torch from someone else who has used the Network for transaction. Key industry personalities such as Binance CEO CZ, Tron’s Justin Sun and several others took part and it was a huge success. Now that the capacity is declining, it will seem the work was in vain.
Bitcoin Network has a major problem with scalability which has hindered it from being used for several different purposes. The block size has been at 1MB since the creation of Bitcoin and has not been increased since then. This has caused a hike in transaction fees as miners prioritize them on the basis of fees.
Transactions with higher fees get to be included in blocks faster than those with lower fees. As number of transactions increase, the fee stake is taken higher, thus worsening the situation.
If the capacity of Lightning Network continues to decrease, we can be sure that the number of on-chain transactions will shoot up and that is not a good place to go.
If the situation does not improve in the next few days then Bitcoin users may have to brace up for a rough time with hundreds of thousands of unconfirmed transactions and higher fees. This would be just like using traditional banking infrastructure and it’s not cool.