Rapture #231: Lightning Network Update

Rapture #231: Lightning Network Update

It has been years since I have written about the lightning network. In fact, I have not looked at statistics in terms of tracking LN adoption for probably 6 months. Recently, I saw Brian Armstrong tweet out at an excellent blog the Coinbase team wrote regarding LN adoption, so I thought I would write a brief post outlining some of the key takeaways and also analyzing some data tracking adoption.

Adoption in terms of metrics

LN capacity has been on a steady rise since its inception, and the metric hit parabolic growth in April 2021. LN can currently support more than 4,500 BTC transfers, which at today's prices is nearly $110 million worth of value. Not too shabby!

Yet other adoption metrics tracking LN are not as rosy as capacity. For example, nodes with LN channels has effectively flatlined since the beginning of 2022, as have unique channels, which tracks channels that connect nodes directly for the first time.

In terms of looking at intra channel metrics, the average capacity per channel is on a steady rise and currently sits at just over 5 million satoshis ($1,274). Average capacity per node is also steadily rising and currently is at approximately 53 million satoshis ($12,800).

Adoption in terms of companies

A wide variety of companies have been formed to service the LN ecosystem. Above, you can see examples of both core infrastructure and consumer apps built on top of LN.

26 exchanges currently support LN, including Bitstamp, Bitfinex, and Kraken. Furthermore, Robinhood recently announced a LN integration for more than 20 million users. These exchange's users can inexpensively and instantly withdraw/deposit BTC to a LN wallet.

LN related companies are also increasingly raising larger rounds, as Lightning Labs raised $70 million for its Series B in April of this year. Additionally, David Marcus, who was previously the head of crypto at Meta, recently raised a Series A for Lightspark.

Impediments

Like many other foundational layers in crypto, the largest impediment to adoption is developer tooling. Without robust developer tooling, app developers trying to build on top of the network will be incredibly slow. Having worked at enough crypto start ups at this point, I can assuredly say developer tooling makes all the difference in terms of actually getting a product to market in a timely fashion.

Furthermore, teaching new users how to utilize LN is a challenging problem yet to be solved. The company best positioned to accomplish this feat in my opinion is Strike, which is a cheaper and faster payments app that looks as good as Venmo.

Takeaways

While there is some promising growth in LN, especially on the capacity side, the technology still by no means has had its big exponential moment. If the moment ever comes, I still believe we are likely years away from seeing it. Dev tooling must catch up before LN becomes even a widely utilized tech within crypto, let alone the mainstream.

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