The capacity of Bitcoin’s Lightning Network (LN), the cryptocurrency’s layer-two scaling solution, has recently dropped over 13%, causing concern amongst its proponents regarding its liquidity and long-term potential.
According to data from 1ML, the capacity of the flagship cryptocurrency’s layer-two scaling solution dropped to 958.9 BTC in the last 30-day period, from its peak of about 1,100 BTC. The network’s capacity surpassed 1,000 BTC in March of this year, the month of its first anniversary.
LNBig, a large node operator on the network, revealed through the microblogging platform Twitter he may have been involved in the drop.
I closed not-used public channels initiated from my side (age >= 78 days). But I intended to close a maximum up to 1.2 BTC and due to error in the script, all these channels were closed - it's -67 BTC capacity. So capacity of LN will drop 1015-67 948 BTC near hours...— lnbig_com (@lnbig_com) June 5, 2019
On social media, various users noticed the sudden drop in the Lightning Network’s capacity, and pointed out that its liquidity has as such been reduced. Some even questioned its long-term potential over the reduction.
Moreover, the network is still hard to use for most, which means that even though it’s been a year the network hasn’t been widely adopted. LN proponents, on the other hand, argue the layer-two scaling solution is still in its early stages.
LNBig's Influence on Bitcoin's Lightning Network
Centralization is also an issue for some, as currently LNBig still controls a large part of the network. Responding to users’ concerns on Reddit, the node operator revealed he currently controls about 473 BTC on it.
Estimates from data providers like 1ML are above his figure, but the user explained that these websites count the total number of BTC within a node as if it belongs to him, meaning funds form channels other people open to take advantage of his liquidity are being considered his.
As for centralization issues, LNBig noted he would like to close more channels that aren’t being used, but is concerned over its impact in the community. Per his words his situation is paradoxical, as if he closes channels bitcoiners start getting concerned, and if he opens too many people scold him for controlling the network. He added:
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.
He noted he maintains some channels open to provide the network liquidity, and encouraged other users to run nodes and add to it. He added that “for the future of the network” he doesn’t close some of the channels he would like to.
When asked about the fees he collects from payments routed through his notes on the LN, he told others it’s too early for these questions as “earnings on commissions in the network are now meager.”
I have 200-300 transactions through all nodes a day, rarely 600 when. On commissions, I earn 5,000-10,000 sats per day. It's $0.4-$0.8. It's $20 in month maximum. Reflect on what is better - % or base fee (are you about this?) - it is nonsense, IMHO.
LNBig noted that to open his channels on the layer-two scaling solution he “probably” spent over $1,000 in transaction fees, meaning he’s still far from making a profit, but has maintained his channels to support the network.
At the end of his post, he noted he believes that instead of hodling, it would be better for the cryptocurrency ecosystem bitcoiners actually use their BTC.