The capacity of the Bitcoin Lightning Network has grown to more than BTC 100 for the first time, with more than 12,000 active channels and 3,300 nodes.
To put this in perspective, in January 2018, there were fewer than 100 Lightning Network channels, and in May there were over 6,600. Clearly, the network is rapidly growing, a positive sign that it will eventually fulfill its goal of being a scalability solution for Bitcoin.
The Lightning Network is a layer 2 scalability solution for Bitcoin. It process Bitcoin transactions off chain, allowing for infinite transactions, versus the only 5-10 transactions per second possible on the Bitcoin blockchain. The Lightning Network achieves this by locking up Bitcoins in a smart contract when the channel is first opened, and then the Bitcoins locked up in the contract are disbursed when the channel is closed. This means each channel produces two on chain transactions, while there may be thousands or millions of transactions off-chain that occur in between.
Transactions sent with the Lightning Network have drastically reduced fees versus on chain transactions, since no mining resources are needed to send transactions on it. In general, all Lightning Network transactions cost far less than USD 0.01 in fees, and this is very important for scalability. For example, when more than 5-10 transactions per second are being submitted to the Bitcoin network on chain, it causes transaction fees to rapidly rise. This was seen at one point during 2018 when the fee for each Bitcoin transaction exceeded USD 50. Once Lightning Network is functioning properly this sort of problem will be a thing of the past, and Bitcoin will be able to scale to the size of Visa (thousands of transactions per second) and beyond.
It will take some time for all the bugs to be worked out of Lightning Network but eventually, it seems that it will offer the scalability that Bitcoin needs. It will be very important to track the evolution of Lightning Network’s capacity and channel numbers over time. These stats have to increase by several orders of magnitude for Lightning Network to become a true Bitcoin scalability solution.
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