Bitcoin Lightning Network: Why “apple to orange” comparisons are useless


The past few months have seen the exponential growth of not only Bitcoin, but the Lightning Network (LN) as well. In fact, during this time it saw a significant expansion of both its payment channels and locked BTC, further signaling the growing importance of the technology.

Lightning Network is a Layer 2 scaling solution built on the base layer of Bitcoin. It allows for the formulation of peer-to-peer channels so that final payment settlement can be deferred to a later date. In addition, it also moves small, infrequent and inexpensive transactions off-chain.

The Total Locked-In Value (TVL) in the Bitcoin Lightning network increased 1,273% in one year, reaching $ 165 million on October 7. The numbers for the same were $ 12.05 million last year, according to DeFi Pulse. Additionally, a 47% rise in TVL was seen in the last month alone, underscoring its popularity.

However, that TVL is comparatively well below the billion double-digit values ​​that L2 solutions based on Ethereum and other DeFi protocols have currently locked down. It’s a “comparison of apples to oranges,” according to Ryan Gentry, business development manager at Lightning Labs. Speaking on the latest edition of the Unchained podcast, the developer explained,

“This is a complete reserve system as there is no notion of debt, there is no multiple of money, there are no additional tokens that are blocked, everything is one hundred percent for the reserve. “

On the contrary, he added, the whole point of DeFi is to make secured loans through which users can multiply their money and increase the total value. So while DeFi has clearly focused on the lending industry, LN was designed for something else entirely.

“The lighting has always been very focused on the transfer of Bitcoin from peer to peer. This responds to the vision of Bitcoin as a peer-to-peer electronic money. “

In that sense, LN doesn’t have a use case for loans, trade, and debt, according to the executive, as the network instead focuses solely on payments, value transfers, remittances, etc. micropayments and tips.

While the network’s support for El Salvador’s Chivo wallet has led to a surge in transactions over the past month, Twitter’s integration of Lightning to tip content creators on the platform has only served its purpose. ” increase its use.

These factors made the network’s transaction volume a much better indicator of adoption, compared to its TVL. Especially since “the whole point of lightning is the efficiency of capital,” argued Gentry.

From August 2021 to September 2021, the number of users increased from 87,000 to 9.7 million. This represented a growth rate of 11.164%, according to a recent report from Arcane Research. He also hypothesized that by 2030, total remittances made over the network would be worth around $ 48 billion, along with a forecast of 1.48 billion transactions.

So it’s no surprise that MicroStrategy CEO Michael Saylor recently called Lightning “the future of global payments.”

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