study in the Diar Digital Assets and Regulation Trade Publication calculated the success rate of transactions on the Bitcoin Lightning Network according to the amount of money being sent. Initial results were not satisfactory, with high transaction failure rates, indicating much still needs to be done before the Lightning Network becomes a feasible scalability solution for Bitcoin.

There was only a 100% success rate for transactions of USD 0.03 or less; transactions greater than USD 6 fail 54% of the time. Less than 10% were successful for values greater than USD 60, while transactions of USD 500 (less than BTC 0.1) or more recorded a 100% failure rate.

The results suggest that the Lightning Network was not yet suitable for real economic activity at this point and can only reliably be used for microtransactions for novelties like Satoshi’s place. For a Lightning Network transaction to work the sender, receiver, and any intermediaries must be online; it is not possible to send to someone that is offline.

A possible solution for large Lighting Network payments is to split them up into smaller transactions and then joined back together at the receiving address. However, this seems unfeasible until Lightning Network’s capacity increases, since a USD 100 transaction would have to be split up into about 330 pieces to have a 100% success rate. This would result in an unnecessary amount of data being sent for a single transaction, somewhat defeating the purpose of the Lightning Network as a scalability solution.

A suggested solution for Lightning Network is increasing its capacity. Currently, the Lightning Network has a total capacity of USD 146,000, only about 25 Bitcoins. This is actually a large increment from earlier in the year when there was a total capacity of less than 1 Bitcoin, so perhaps if this trend continues, eventually the Lightning Network will be more reliable for real economic activity.

It would be optimal if high-capacity Lightning channels were created that are always online, and other users can route payments through these channels. However, cryptocurrency companies and exchanges, who are the organizations most capable of setting up such a channel, may not readily do so as AML-compliant organizations must know the identities of all users, and this is not yet possible on the Lightning Network.

In fact, anyone operating a Lightning channel could be considered a money transmitter, and therefore could be prosecuted for breaking the law. So far no government action has been taken against lightning network operators, but this could change if it starts moving large amounts of money.

 

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