On 15 March 2018, Californian blockchain startup Lightning Labs announced the release of the beta 0.4 version of Lightning Network Daemon (“lnd”), its implementation of the Lightning Network protocol; it called this “the first Lightning mainnet beta.” And since then, Bitcoin’s Lightning Network (a.k.a. Lightning or LN) and its ecosystem has been experiencing “lightning fast” growth.
According to the latest data from Lightning Network monitoring site 1ML, in the past 30 days, the Lightning Network has seen impressive growth:
- number of Lightning nodes: 7,415; up 17.96%
- number of Lightning channels: 39,394; up 46.5%
- network capacity: 1,064.96 BTC; up 55%
However, it is worth noting that there are those, such as one of the co-hosts of the Bitcoin-focused “Reckless Review” podcast, who say that such metrics do not tell the whole story:
I recently authored a Hebrew article on LN for non-bitcoiners, on a popular Israeli finance paper. The editor asked that I add usage metrics, but I refused, because:
1. channels can be private (unannounced), thus won’t show up anywhere. Eventually most channels will be private
— Udi Timechainheimer (@udiWertheimer) March 16, 2019
2. On the other hand, it’s trivial for hodlers to open channels and announce them, at zero-risk. Can even be on cold storage and would still be counted. So the published numbers (like 1000 BTC) aren’t even a meaningful lower-bound.
— Udi Timechainheimer (@udiWertheimer) March 16, 2019
Another critic, Professor Jorge Stolfi, says that charts showing the rapid growth of the Lightning Network, such as those provided by “Bitcoin Visuals”, are fine, but it would be good to have some other (perhaps, even more useful) real-world statistics:
Maybe no one will notice the four charts that are missing on that site:
“Number of successful payments made per day”
“Average value of successful a payment”
“Average number of paths tried for each successful payment”
“Number of attempted payments that failed to go through”
— Jorge Stolfi (@JorgeStolfi) March 16, 2019
So, why is Lightning Network growing so quickly? Well, there are several explanations:
- There is a real need for very fast and very low cost Bitcoin payments, which is especially true in the case of micro transactions (such as for tipping creators of interesting or useful social media posts), which is not addressed by on-chain Bitcoin transactions;
- Increasing availability of easy-to-understand guides and tools for using the Lightning Network, such as those mentioned in Jameson Lopp’s “Lightning Network Resources” directory, a few examples of which are “Bitcoin Lightning Network FAQ”, Pierre Rochard’s “Easiest Bitcoin Lightning Guide!”, Jack Mallers' Zap Desktop and Mobile wallets, William O'Beirne's Joule Chrome plugin, BlueWallet, Wallet of Satoshi, Casa Node, and Nodl; and
- Increasing public awareness of the benefits of Lightning Network, such as the Lightning Torch initiative started by Twitter user “@hodlonaut” on January 19th.
As for the pros and cons of the Lightning Network, here are some mentioned by Shivendra Nath Misra in reply to a question on Quora.
- “Unlimited Transactions before broadcasting to the bitcoin blockchain”
- “Atomic Swaps”
- “Secure from double spends”
- “Reduced Transaction fees”
- “Lower Fees: We’re already seeing lower fees on transactions as a result of SegWit, but the Lightning Network further reduces them due to the fact that you aren’t spamming a blockchain with transactions. While it may seem like a great idea from the idea of saving, it does bring about a potential issue: Bitcoin’s sustainability is somewhat fee-driven. As the number of bitcoins awarded keeps halving every four years, there will be a time when fees will be the only reward for miners and a lower-fee model may hamper the incentive for the miner to verify transactions.”
- “Instant Transactions: We know that Lightning Network enables faster transactions… The downside to this setup is that security and transparency are dropped on a per-transaction basis. For example, if I’m sending you 0.001 BTC per 15 minutes of your help and you help for 45 minutes, the BTC blockchain may see that I sent you 0.003 BTC. But the actual transaction would be three sends of 0.001, giving transparency into calculations and exactly how the deal took place and was carried out. In the vast majority of cases, this would be irrelevant, as we just care about the end result. That said, it’s worth noting because it does slightly deviate from the ‘every transaction is visible’ idea BTC is known for.”
- “Unlimited Transactions is only good for payments: The misconception is that unlimited txn scaling will solve all the problems. When in fact it doesn’t. Because every open/close of an LN channel means a (slightly beefier) txn on the Bitcoin blockchain. This creates an interesting case that if Lightning txns scales to encompass the entire world worth of daily transactions (the often touted ‘VISA’ standard) then it would be a problem if for any reason a massive number of payment channels would need to be closed all at once. Additionally scaling in this dimension only helps payments.”
- “Inverse Security mechanism as compared to bitcoin: The security model in Lightning is the inverse of the one used in Bitcoin. In Bitcoin, you don’t have my money until I send it to you. There is nothing you can do short of stealing my private keys to take my money from me. Conversely in Lightning, the security of the payment channels requires constant monitoring to ensure that your counterparty is not stealing money from you by publishing an old channel state to the network.. Basically, the security model of Bitcoin changes to one where you have to actively guard against theft, instead of the current one where you have passive protection from theft (assuming you manage your own private keys).”
- “Centralisation: The economics of payment channels and efficient routing between n-to-m endpoints means that the most efficient (in terms of minimizing the number of hops) configuration of the network would be large payment hubs that would have open channels to everyone else (and to each other). This means whomever has more money available will be able to open and maintain more payment channels, becoming a payment hub. Who would have the most free capital available? Banks. Existing banks would be the best positioned to run payment hubs.”
Bitcoin’s Lightning Network is not perfect. This has been acknowledged by Alex Bosworth, Lightning Infrastructure Lead at Lightning Labs:
With Lightning 1.1 we will be taking a big step away from 1.0. Interestingly there’s a parallel to Bitcoin history where the protocol has outlived its creator and now has a life of its own. As we fix key original design errors, no one is making specious claims to original vision.
— Alex Bosworth ☇ (@alexbosworth) March 1, 2019
However, this does mean that it has little value at present or that its limitations cannot be addressed in the future. The lightning Network of tomorrow can look very different from the Lightning Network of today. We should not lose sight of the fact that this baby is only one year old (as we were reminded by Lightning Labs on Friday):
Today marks the first anniversary of the #lnd mainnet beta! 🎂
Thanks to our community, devs, testers, and everyone else who's helped with the incredible growth of Lightning. 📈
— Lightning Labs⚡️ (@lightning) March 15, 2019
So, happy birthday Lightning Network! Congratulations on all of your successes!
Featured Image Credit: Photo via Pexels.com