The Bitcoin Lightning Network saw an unprecedented increase in capacity in terms of Bitcoin and the number of open channels in the two weeks from 12 November to 26 November 2018. The capacity of the Lighting Network rallied from around 110 Bitcoins to 460 Bitcoins, while the number of channels spiked from 13,000 to 16,500.

The cause of this increase in adoption becomes clear when looking at the market behavior during the same time. Bitcoin crashed from USD 6,500 to USD 3,500, and the increased volume during this crash caused Bitcoin transaction fees to exceed USD 1 on 20 November. The purpose of the Lightning Network is to be a scalability solution so that Bitcoin can handle an increased amount of transactions while keeping on-chain transaction fees low. It appears the Lightning Network has fulfilled this objective mission during the crash of November 2018.

The Bitcoin Lightning Network functions via a smart contract that creates a lightning channel, where a user deposits Bitcoins into the smart contract, making them become usable on the Lightning Network. A smart contract also closes the channel and the Bitcoins are disbursed to their rightful owners. This directly ties lightning channels to the Bitcoin blockchain, but only two transactions are needed on-chain per channel for the Lightning Network to operate. In between the opening and closing of a channel, there can be infinite transactions within the channel, and these are all off-chain with practically zero transaction fees.

This makes the Lightning Network an attractive scalability solution for Bitcoin, since if blocks ever reach capacity consistently and transaction fees begin to rise, like what happened during the crash of November 2018, then Bitcoin users can choose to start using Lightning to avoid fees and waits.

It is unknown just how high transaction fees would have gotten in November 2018 if the Lightning Network did not exist. It is becoming clear that the rapid increase in capacity helped alleviate the higher than normal transaction fees, and as of early December, transaction fees are declining towards baseline. During the big rally of December 2017, transaction fees exceeded USD 50 for several days, demonstrating the sort of crisis that could happen in the absence of the Lightning Network.

The alleviation of Bitcoin’s transaction fees and simultaneous rise of Lightning Network capacity may be a sign that it has approached maturity and can handle any sort of transaction fee crisis in the future. This will ensure for the long term that Bitcoin does not become unusable due to rising transaction fees.

 

Follow BitcoinNews.com on Twitter: @bitcoinnewscom

Telegram Alerts from BitcoinNews.com: https://t.me/bconews

Want to advertise or get published on BitcoinNews.com? – View our Media Kit PDF here.

Image Courtesy: pixabay
Comments are closed.

Check Also

Does Blockchain Have the Potential to Improve Weather Forecasts?

The weather impacts practically every aspect of life on this planet. Temperature forecasts…