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There was a time when scaling Bitcoin was the next evolutionary step. In 2018, it fueled the rise of the Bitcoin Lightning Network. However, the hype and functionality of the L2 payments protocol have faded over time. Whether it’s the store-of-value narrative or Bitcoin being dubbed “digital gold,” few speculators are concerned about its suitability as a mode of transaction.
Between February 2020 and 2021, its growth was also modest, with total capacity increasing from 886 BTC to 1095 BTC (23 percent ). Nonetheless, it may be time to revisit the state of lightning as there have been a few changes.
Bitcoin Lightning strikes back
Since the beginning of March 2021, Bitcoins locked on the Lightning Network have parabolically risen, almost doubling its tally of 1095 to 2087.87 BTC at press time. The number of nodes has also doubled, tallying up to 23,880. A significant number of channels was also observed on 1ml.com at the time of writing, rising up to 60,978.
If Lightning continues to grow at its current rate, the L2 scaling solution will have surpassed a capacity of 10,000 BTC by March 2022.
The lightning channel is now used to send small Bitcoin transactions. Furthermore, during its resurgence, the number of Bitcoin addresses holding between 0.01-1 BTC has increased.
On May 11, there were 8.17M addresses holding 0.01-1 BTC. However, on July 28, there were 8.25M addresses holding 0.01-1 BTC.
Is this period of expansion legitimate?
If we look back in Lightning’s history, we can see that it was created to facilitate cheaper and faster transactions. However, other networks have done it better over time, and Lightning has remained a victim of slow development. Many users are dissatisfied with its rate of growth, which was fairly visible between February 2020 and February 2021.
However, since El Salvador’s government announced Bitcoin as legal tender, the narrative may have shifted slightly. With a country making it legal to facilitate Bitcoin transactions, the Lightning Network is currently experiencing increased exposure and demand.
This story will only get more interesting if other countries or organisations start accepting Bitcoin payments. Bitcoin lightning may not be finished just yet, but it has come back from the dead.