Bitcoin Lightning Network growth is organic, coming from real-world adoption

Bitcoin Lightning Network (LN) capacity recently surpassed an all-time high of 5,000 BTC.

The Lightning Network is a neutral protocol built on top of Bitcoin and currently does not have a "native" token attached to it like many decentralized finance platforms.

Although the total liquidity of the Lightning Network is less than 0.5% of ETH in DeFi contracts, the upward trend in Bitcoin LN capacity versus a downward trend in the amount of ETH locked in smart contracts is encouraging for the development of LN.

While liquidity on LN has been steadily increasing, the number of channels on the peer-to-peer network dropped sharply in November following the FTX crash. It could be due to an exodus of miners operating LN nodes in addition to running mining clients.

However, the probable end of mining capitulation and the rise of Bitcoin-based applications such as NFTs could mark the end of the capitulation of the LN channel. Since the beginning of 2023, more than 2,000 new channels have been added to the network.

A report from Valkyrie Investments fixed that LN adoption was accelerating in emerging markets such as South America and Africa, primarily due to the efforts of LN's mobile payment app, Strike.

In December 2022, the firm launched an LN-based remittance service in Africa. The service offers free transfers from the US to Africans in Nigeria, Ghana and Kenya. Later, Strike announced a similar program in the Philippines.

More recently, the firm Announced dollar payments using LN, where users can potentially send dollars from Strike's cash balance to savings and VISA-enabled accounts. The app will convert USD to BTC in the background and convert it to USD on destination. Since LN is fast and cheap, the risk due to Bitcoin price volatility is minimal.

The cost of international payments from the US can add up to $45 per transaction, with transfers taking hours or sometimes days. Therefore, users might start to prefer Strike-based payments over traditional remittance channels.

A recent report by Marty Bent found that LN payments have increased this year in the main wallets of the Lightning Network, Wallet of Satoshi. Additionally, a podcasting platform, Podcasting 2.0, which accepts LN payments, also saw an increase in tips sent to creators.

Related: Retail giant Pick n Pay to accept Bitcoin at 1,628 stores in South Africa

Nostr is driving the adoption of LN

Another factor influencing the adoption of LN is the release of Nostr. According to the protocol's Github page, Nostr is a simple and open protocol that enables global, decentralized, and censorship-resistant social networks. The protocol allows social networking applications to be built on top of it.

Damus, a Twitter lookalike, implements Nostr with an app for IOS and Android. The idea of ​​a free and open social media network resonates strongest in the crypto space. Bitcoin pioneers like Jack Dorsey and Adam Back have backed by Nostr.

Apart from the similarities in ideology, Nostr may boost LN adoption as Damus has integrated various LN wallets like Wallet of Satoshi, Strike, BlueWallet and others. A report by LN analyst Kevin Rooke, aforementioned that more than 600,000 users registered with Nostr. This could help users onboard LN as Nostr inherently supports the Bitcoin payment network via Nostr Zap.

The Lightning Network is a neutral protocol built on top of Bitcoin, with no token attached, which prevents speculation. There is performance potential for LN nodes as fees to facilitate transactions and provide liquidity. However, in the current state, the gains are negligible. Thus, the growth of the Lightning Network appears organic and well positioned to become the leading global payment network, which prominent personalities in this space have foretold.