What's Happening on the Lightning Network?

Key Insights

• An increase in adoption and integrations led to Lightning’s public channel capacity reaching 3,624 bitcoin or $143 million, a 198% increase YOY.
• Growth in infrastructure service providers, including node cloud hosting and node management software companies, have made it simpler for users to use the Lightning Network and for businesses to integrate Lightning into their products and services.
• Users with access to Lightning payments increased from 10 million in October 2021 to over 80 million in March 2022.
• Taro, a new Taproot-powered protocol introduced by Lightning Labs, aims to bring stablecoins and other assets onto Bitcoin and Lightning.

Most people in crypto know that the Bitcoin base layer suffers from a scalability problem. First introduced in 2015, the Lightning Network (LN) aimed to solve the scaling issues by using a Layer-2 payment channel network anchored to the base protocol. Lightning's scaling approach gained popularity over time and is now considered to be the de facto scaling solution for Bitcoin.

Launched in 2018, the first three years of the LN’s adoption were underwhelming. At the beginning of 2021, Lightning only had about $40 million in public capacity (i.e., total value locked) and was estimated to have fewer than 100,000 users with access to Lightning payments. It appeared that the network lacked the incentives needed to bootstrap the liquidity in payment channels necessary to facilitate transactions. Furthermore, the network was not capital-efficient, as it had to pre-fund channels with bitcoin, adding yet another hurdle to adoption.