Which Are The Issues Bitcoin’s Lightning Network is Currently Facing?

  • The Lightning Network could be facing some problems
  • As soon as these challenges are addressed it could help Bitcoin scale
  • Bitcoin (BTC) developers have been working during the last years in a scaling solution for Bitcoin called Lightning Network (LN). The LN was expected to help Bitcoin scale processing a large number of transactions for almost no fee, which is something impossible to do through Bitcoin’s mainnet. However, during the last few months, there is no positive information about it and its development.

What Is Happening With The Lightning Network?

At the end of the last year, the LN experienced a rapid increase and expansion. The market was very excited about it, even when Bitcoin was not performing well. Indeed, the digital currency was reaching its lowest price in more than a year. In March this year, the network seems to have reached a top in terms of network capacity and channels opened between nodes.

The second layer scaling solution for Bitcoin seems to be experiencing difficult times. Indeed, Nic Carter, a partner at Castle Island Ventures, wrote on Twitter that the Lightning Network has a reasonable chance of not working.

Although the number of channels and the network capacity have been falling since May, the number of nodes has also increased. In May 2019, the LN registered almost 1,100 BTC in network capacity, but it has been falling since then and it currently has a capacity of 949 BTC. Nonetheless, the capacity in terms of USD remained stable. At the same time, the number of channels fell from 36510 to 31700. That represents a reduction of over 13%.

The number of nodes has also been increasing during the last few months, showing that there is interest in helping the LN be connected.

According to news.bitcoin.com, one of the reasons why the capacity of the LN has decreased from the highest point reached in May is due to LNbig that closed some of its channels. Thus, the removal of some BTC they had in the network has affected the whole LN.

LNbig commented about the decision to close these channels:

“When you open a lot of channels – everyone scolds you that you are capturing the network. When you close – there are also concerns. I would be very happy if other large players would now open channels and bring more liquidity to the network. But oddly enough this almost does not happen.”

They have also encouraged users to run more nodes and put their liquidity there. At the moment, opening LN channels is not an easy task since it can only be done by benevolent users. LNbig claims that they earn $20 per month in commissions for transactions they route handling between 2 to 300 transactions a day. Nevertheless, opening and closing a channel on the main Bitcoin chain cost $1,000 in fees.

Although ultra-low fees are one of the main features of the Lightning Network, if they are not enough to cover the costs of liquidity providers, the LN will not be self-sustainable. According to some reports, the LN is a project that has been in construction for several years and that developers claim it is always “18 months away” from being released.

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