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Bitcoin [BTC] locked in Lightning Network hits ATH at 2.44k BTC

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Bitcoin, the dominant cryptocurrency in the cryptocurrency space, has its own ups and downs. Many proposals were made to address some of the issues. Among them was the Lightning Network protocol, which was introduced to address network scalability issues.

According to DeFi Pulse, Bitcoin [BTC] locked in Lightning Network reached an all-time high of 2.44k BTC on September 12th. The cryptocurrency locked in the second-layer scalability solution briefly slumped from 31 August to 3 September due to the crypto market’s back-to-back price corrections. Since then, the figures for BTC locked in LN have steadily risen in tandem with the cryptocurrency’s price recovery.

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Bitcoin LN growth

On the other hand, the total value locked in LN in terms of USD peaked on September 7th at an ATH of $125.24 million. It has since declined slightly, but it is still close to the ATH. At press time, the figures stood at $111.17 million. Nonetheless, this is a positive development for the Bitcoin ecosystem. At a time when it is trading below the $45,000 mark after El Salvador adopted BTC as a legal tender, there has been further interest in the LN capacity.

Electra Group, one of Mexico’s biggest retail franchises, hinted at the possibility of adopting Bitcoin on the LN a few days back. On his most recent visit to the United States, Ukraine’s President, Volodymr Zelensky, held talks with crypto investors about the prospect of making Ukraine a digital asset hub.

LN, which has been lauded for its ability to reduce wait time and transaction fees, has garnered even more attention. This is evidenced by the fact that it has doubled its BTC capacity in a year, with over 70,000 open channels. In less than two months, from June to August 2021, there was a 46 percent rise. Constant technical up-gradation can extend the network’s reach as it evolves.

Bitcoin Lightning Network could soon see integration with Mexican financial giant

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Mexican financial and retailing corporation Grupo Elektra is all set to integrate support for the Bitcoin Lightning Network, according to its owner and businessman, Ricardo Salinas Pliego.

Pliego, who happens to be the third richest person in Mexico and leads one of the biggest conglomerates in the Latin American country with an estimated net worth of $15.4 billion, has been a proponent of Bitcoin [BTC]. Last November, he had revealed investing 10% of his portfolio in the world’s largest cryptocurrency.

More recently, the billionaire declared his intention that his bank, Banco Azteca, was in the process of becoming the first in the country to accept Bitcoin. However, Mexico’s central bank quickly shot down Pliego’s plans. It issued a statement saying cryptocurrencies such as Bitcoin are not legal tender and are prohibited from being used in the country’s financial system.

Bitcoin Lightning Network Growth

Nevertheless, Pliego’s latest announcement comes days after reports about the social network giant Twitter getting closer to integrating the Bitcoin lightning network for micropayments made rounds. The platform is currently in a testing phase for the operating system iOS Beta, according to the reports. The main aim behind this move is to facilitate a whole new payment option for users, alongside the already existing Cash App, Bandcamp, Patreon, Venmo, and PayPal, to reward content creators through the freshly launched feature “Tip Jar”.

Lightning Network is a second layer technology that has been ramping up BTC transactions since early 2018, thereby bolstering the adoption of the cryptocurrency. A brainchild of Lightning Labs, LN was proposed as a solution to the Bitcoin scalability problem. Three years ago, it had secured a whopping $2.5 million in seed funding that saw the participation of Twitter CEO Jack Dorsey, among others.

CoinShares investment strategist James Butterfill had earlier stated,

“Lightning is much more secure than Visa, and could do more transactions than Visa.”

Bitcoin.com’s Roger Ver Attacks Lightning Network While Community Comes to its Defense

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Bitcoin has had its fair share of detractors with several present even within the cryptocurrency industry. Since inception, the world’s largest cryptocurrency has witnessed several camps attack its credentials with some claiming that there were other ways to better use blockchain technology.

One of Bitcoin’s biggest critics was Roger Ver, who led the charge to create a new token called Bitcoin Cash by forking off Bitcoin. Since Bitcoin Cash was founded in 2017, Ver has not missed an opportunity to point out Bitcoin’s shortcomings. 

In his latest tweet, the founder of Bitcoin. com set his scope on the Bitcoin Lightning Network [LN]. Ver stated that the LN was an utter failure because it had not achieved any of the scaling milestones it had promised its user base. His tweet read:

Currently, there was Bitcoin worth $927.6 million locked in terms of dollars, a holding that had increased by 1 percent over the previous 24-hours. At the same time, the total Bitcoin-Ethereum pair was worth 2.6 million ETH while locked native BTC tokens amounted to 85.6K BTC. Ver’s comments received a lot of flak with the user base attacking Bitcoin Cash and its faults.

The LN community stated that Bitcoin Cash fell short of achieving the lofty milestones it had set itself with the cryptocurrency failing to make any significant impact on the charts. At press time, BCH was trading for $213 with a total market cap of $3.95 billion. A 2.16 percent price hike over the past day helped increase the daily trading volume to $1.28 billion. Despite his naysayers, Ver also had a staunch following who believed that the LN was nothing more than a diversion from actual developments in the space. This was put in words by Nanosapian, who tweeted:

“LN was never meant to work. It was meant to distract and redirect attention when scaling questions are asked.The reason is simple – BTC cannot scale and is now intended to be another custody solution. $NANO actually scaled while maxis lied.”

The Lightning Network was also in the news recently when the Lightning Network Daemon added accounting features to its network while upgrading c-lightning at the same time.

Bitfinex Announces Support for Lightning Network’s ‘Wumbo Channels’

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Leading cryptocurrency exchange, Bitfinex announced integrating Lightning Network’s Wumbo Channels to expedite payment transaction time, on its platform, enabling the exchange to provide users with instant Bitcoin deposit and withdrawal capabilities.

The Wumbo channels aim to offer the Bitfinex users the ability to deposit and withdraw large amounts of Bitcoin more efficiently and in a cost-effective way. This would eventually prompt retailers and service providers to build new, innovative applications and sell high-value goods and services over the Lightning Network with the help of Wumbo Channels as they help to reduce the requirements to open and close multiple channels, the blog post revealed.

Earlier, the protocol developers had set a hard cap on the maximum capacity of the Lightning Network payment channels in order to protect users from unexpected bugs or errors in the still-nascent network was still young, since its implementations were in a development phase.

But as the second-layer scalability solution became more mature, the major implementations of the Lightning Network protocol have measures to remove the hard cap on channel capacity, which had earlier thwarted the capability for unlimited channel sizes and payment amounts.

The official announcement further read,

“With this support, the general public will have the ability to open channels up to 2 Bitcoin capacity with either of our nodes. A number of initial retailers and wallet providers like Bitrefill, LnMarkets and Lightning Labs, with the ability to open channels with up to 5 Bitcoin capacity.”

While asserting that this development was in fact a “big step towards the goal of scaling Bitcoin” through the adoption of the Lightning Network, Bitfinex also revealed 3×5 Bitcoin channels, which are the biggest channels in the network so far.

Interestingly, Bitfinex was one of the first major crypto exchanges to have integrated the second-layer protocol on its platform in December 2019 shortly after integrating bech32 [SegWit] addresses the previous month as a primary step toward the full Lightning integration.

The Layer 2 protocol has seen a steady rise in terms of the total value locked [USD] in its. At the time of writing, this figure stood at $11.74 million.

DeFi Mania Eclipses Bitcoin’s Sidechain Liquid as Latter’s Figure Stagnates

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Despite being the undisputed leader of the cryptocurrency realm, Bitcoin blockchain has been riddled with scalability issues. Due to this, many implementations have been tried and tested to make the network more efficient.

One such is Blockstream’s sidechain-based settlement network, Liquid’ which is essentially a second layer solution for traders and exchanges, that enables faster, more confidential Bitcoin transactions and the issuance of digital assets.

L BTC in circulation

Despite being heralded as a promising solution to the network’s scalability problems, Liquid network figures appear to have stagnated. The circulation of L-BTC was on an uptrend since the beginning of the year. Rising from 600 L-BTC to 2,054 L-BTC, recording a growth of more than 242% in a period of just four months. However, post-April, the momentum appeared to have weakened. At the time of writing, there were 2,593 L-BTC in circulation, a rise of just 26% since April.

Ethereum- the unofficial sidechain for Bitcoin?

skew bitcoin defi lightning wbtc value 1

Interestingly, this stagnation in Bitcoins locked on the popular sidechain coincided with the explosion of DeFi. The Ethereum network is becoming Bitcoin’s largest second layer network. This was evident from the fact that the number of Bitcoins “wrapped” and flowing on the Ethereum blockchain has been increasing at an incredible rate.

TWJ had earlier reported that Wrapped Bitcoins’s market capitalization hovering a little below $500 million.

Second-layer solutions struggle as Bitcoin continues to be channeled onto the Ethereum blockchain

Additionally, the total value locked [TVL] for BTC-pegged ETH tokens has surpassed both Liquid as well as the Lightning Network platform combined. At the time of writing, BTC locked in LN was just 1,068. While this does not give the full picture as Bitcoins held on LN is much higher than what is available with public data and not the ones from the private channels, this, however, tells us that the second layer solution is struggling to add more liquidity.

Is Ethereum Providing Better Bitcoin Scaling Solutions Than Bitcoin Itself?

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Bitcoin does a whole list of things that are right for the digital asset industry. ; The largest crypto has one of the most secure blockchains, a dependable insurance rate, and a complete decentralization structure.

In the midst of all of its proverbial advantages, the main issue of Bitcoin remains its ability to handle a higher number of transactions; in short, its scalability. The inability of the network to facilitate more transfer has caused network saturation, which in turn spikes up the transaction fee during high on-chain activity.

Now, in the last few years, a number of off-chain solutions have been proposed to solve this conundrum. Bitcoin’s Lightning Network and Blockstream’s Liquid have often led development, but over the past 12 months, Ethereum’s DeFi has also been a popular platform.

In a recent blog post of Arcane Research, the aforementioned off-chain solutions were reviewed to understand their present status.

Blockstream’s Liquid Network and the Lightning Network

Data from Arcane Research suggested that the Bitcoin sidechain Liquid, which processed faster transactions with the help of L-BTC has performed admirably since January 2020.

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According to the chart above, L-BTC in circulation during the month of January was close to 600 but since then, the sidechain has witnessed high adoption as the number of L-BTC has spiked up to 2476 in July 2020.

Lightning Network hasn’t been behind as well, but it is important to note that Bitcoin’s LN chain has received a lot of criticism over the past few months. Since its launch in 2018, it has been touted as the mainstream solution to solve BTC’s scaling problems but the narrative continues to be “underdevelopment”, in spite of launching back in January 2018.

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The above chart exhibits that over time, Bitcoin’s LN adoption rate is not exactly impressive but according to BitMEX Research, it is difficult to measure its exact adoption. The report suggested that 28% of LN channels are private as of January 2020, so BTC locked in those channels are not added up.

Ethereum’s WBTC; Tokenized Bitcoins taking the cake?

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Now, In spite of receiving mainstream adoption only in January 2020, tokenized Bitcoins on Ethereum is rapidly becoming a sought-out solution for scaling Bitcoin.

It is a completely separate off-chain platform where tokenizing BTC as an ERC-20 token enables functionality and makes it compatible with the Ethereum DeFi ecosystem.

Wrapped Bitcoin of WBTC is the largest BTC token on Ethereum and it currently holds 11136 BTC into its protocol. It completely blows Liquid and LN’s adoption out of the water in terms of growth.

Now, the major trade-off is the fact that tokenized BTC on Ethereum has a layer of centralization surrounding its development, and it is also more complex than using Bitcoin on its parent blockchain.

Conclusion

In terms of growth, tokenized Bitcoins on Ethereum are head and shoulders above Bitcoin sidechains and it is becoming rapidly evident that users are preferring Ethereum over Bitcoin’s blockchain but considering the likes of WBTC is completely centralized, Bitcoin sidechains may still have an advantage in the future, only if they can pump up their numbers and establish themselves as a legitimate solution.

Square Crypto Funds “The Eye of Satoshi” Bitcoin Lightning Network Watchtower

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Square Crypto has been dispensing out grants to developers working on free, open source projects that underpin the future burgeoning of both the Bitcoin and Lightning networks. This time around, its latest allocation went to a watchtower service for the Bitcoin Lightning.

The digital currency creation division of Jack Dorsey’s Square payments company, Square Crypto, has offered to sponsor the Eye of Satoshi, a Lightning Network watchtower that keeps track of blockchain transactions to shield the users on the layer-two scaling solution.

The Eye of Satoshi watchtower comes from the Spanish developer Talaia. Watchtowers were introduced to the Lightning Network back in 2019 to act as a reserve service option for tracking blockchain transactions when your Lightning software is inactive. Indeed, with the Eye of Satoshi observing, it is impossible for peers to block the channel and grab your crypto.

“If your Lightning Network software is ‘offline’—as in it isn’t actively monitoring the blockchain—you need a third-party that can keep watch for you. This could be because you’re running a lightweight wallet, aren’t actively using your wallet, or your Lightning Network node crashes. This is what watchtowers do.” highlighted Square Crypto on Twitter.

Square Crypto highlights the benefits of having watchtowers in place

Currently, Talaia operates on C-Lightning and will also work with different Lightning Network enactments. Additionally, Square Crypto noted that there will be several advantages of the Eye of Satoshi than just keeping an eye on blockchain transactions. According to the funding firm, the watchtower protects the network’s users from some type of attacks.

Square Crypto is an arm of major Fintech firm Square, founded and run by the also CEO of Twitter, Jack Dorsey. Dorsey is famous in the cryptocurrency industry for his support for Bitcoin. Moreover, Dorsey is not only an oral supporter of Bitcoin but he also practically purchases a full Bitcoin every week, utilizing Square Cash App. Furthermore, the Twitter CEO has also set up a task force at the social media giants to develop a decentralized version of Twitter. 

Samson Mow’s Doubles Down on Lightning Network’s Capabilities in The Wake of BitMex Report

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Blockchain technologies have been trying their best to outperform institutional assets and in many cases, that has been a success. Experts in the decentralized space believe that as long as decentralized technologies can beat traditional competitors the field will continue to sustain.

In a recent Twitter thread, Samson Mow, the CSO at Blockstream touched upon the fact that the Lightning Network’s total work rate had surpassed those of its competitors and even traditional mainstays. 

According to analysis, the Lightning Network’s scaling capabilities had allowed it to overtake transaction rates put forth by Next-Gen blockchains as well as Visa and Alipay. The entire sector celebrated the fact that a blockchain solution had managed to beat the efficiency of worldwide systems such as Visa.

“Next-Gen” blockchains

Research showed that the Lightning Network-enabled by private channels could conduct up to 25.2 million transactions per second [tps] while the traditional Lightning came in second with 17.8 million tps. The hyped “Next-Gen” blockchains could only handle 400,000 tps while Visa and Alipay clocked a dismal 65,000 and 50,000 respectively.

The low transaction rates possessed by popular cryptocurrencies have been one of the major hindrances for its adoption rate. Bitcoin, while being the largest cryptocurrency in the market only possessed a transaction rate of 10 tps. Elaborating on LN’s capabilities, Mow tweeted:

“We also estimate that ~40% of channels and overall capacity are private. That means total LN capacity is approximately 1218 $BTC or ~10 million USD. #LightningNetwork theoretical throughput is calculated based on the total number of channels and a per channel capacity of 500 tps.”

The quick micro-transactions capability that the LN is known for has even made it to mainstream online markets. Eagle-eyed users noticed recently that the Lightning bug had even bitten pop sensation Lil Pump. The singer’s website now accepts Bitcoin payments via the LN for purchases.

Mow’s comments came in the wake of a BitMex report that showed that non-cooperative channel closures within the BTC LN made up of a majority of its activity. A non-cooperative channel closure occurs when a single member of an open channel leaves and reclaims their holdings from the network. Even Jameson Lopp had gotten in on the action by tweeting against the Lightning Network. The computer scientist went in all guns blazing stating:

“New report from BitMEX Research has found far more non-cooperative Lightning Network channel closures than expected, suggesting that there are a significant number of private channels that normally can’t be seen”

Conclusion.

The report has been doing the rounds for quite some time now but the proponents of the Lightning Network continue to stand steadfast on its capabilities. Bitcoin‘s peripherals have garnered a fresh boost because of the cryptocurrency’s recent price surge allowing it to climb towards the $9000 mark.

BitMEX: Bitcoin’s Lightning Network Usage Surpasses Expectations

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According to recent research by the analysis arm of Bitcoin margin trading exchange, BitMEX, the use of Lightning Network on Bitcoin (BTC) has been higher than expected. The scaling solution for the world’s most popular digital currency has demonstrated significant growth across various aspects.

BitMEX applied different research methodologies to come up with a report. According to the report, Bitcoin’s off-chain scaling solution continues to rise. BitMEX concluded that the number of non-cooperative closures has grown past 60,000. In addition, around 6,000 BTC has been spent on closure transactions. Lightning Network is a second layer scaling solution that enables the users to transact using Bitcoin at extremely low fees. The report also outlines that it may be a sign of intense experimentation. It reads:

“The volume of transactions here is quite large and may indicate more experimentation with lightning than many expected. The data also indicates non-cooperative closures are more of a common closure type than people think.” 

How Lightning Network’s Growth is Crucial for BTC’s Long-term Trend

On the Lightning Network, a channel is the same as opening a tab on a bar. The same way customers can order drinks and beverages throughout the whole session and settle all the payment with a single bill, the users on Lightning Network can initiate several transactions and solely close the channel after all the transactions are complete.

Indeed, the closing of the channel takes place on-chain on Bitcoin’s blockchain grid which is rigid and unchangeable. Due to this, the network enables the settlement of many bitcoin transactions at the same time.

“Our database illustrates that non-cooperative channel closures are relatively common and that lightning network usage is higher than expected,” noted BitMEX.

The latest report by BitMEX Research indicates that the use of the Lightning Network has surpassed expectations over the past year. The uptrend surge in its use is very crucial for Bitcoin’s long-term growth. Unlike Lightning Network, most blockchain networks especially those utilizing a proof-of-work consensus algorithm, the on-chain transaction capacity is limited.

Furthermore, most blockchain networks such as Bitcoin and Ethereum can allow between 6-50 transactions per second. However, transacting beyond that often results in high fees charged. Hence the success in implementation and growth in usage of a second layer solution such as the Lightning Network; are significant for any large-scale blockchain network. The report reads:

“The findings may indicate that experimentation with mobile lightning wallets (which often produce private channels) may be more common than many expected. The data may also indicate that non-cooperative closure types are more common relative to the cooperative closure type, than the community thought.”

Fundamentals to Consider

The rise in the use of a second layer solution is among the several significant fundamentals factors of Bitcoin’s long-term growth. Other important factors include a consistent increase in active developers, large developer activity, and an increase in unique addresses on the Bitcoin network. If these fundamentals continue to improve as the year progresses, it is expected to have a positive effect on the price of Bitcoin.

Conclusion

At the moment, the Lightning network enjoys a volume of about 865 BTC. This is 1% more than it could handle over the past one month. Regardless, the developments in Lightning Network are particularly crucial. They are not only meant to trigger Bitcoin’s mass adoption but settling micro-transactions faster and at scale is important for our daily applications. So far, Lightning Network seems to be on the right track.

 

Bitcoin Lightning Network Suffers Security Vulnerabilities, Community Demands Upgrade

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Crypto Twitter demands to upgrade the lightning nodes as various Bitcoin Lightning projects reportedly suffer security vulnerabilities that may possibly result in loss of funds.

Developer Reported Three Vulnerabilities in LN

Brief of the issue was shared by Bitcoin developer Rusty Russell on August 30 and advised Lightning Network to upgrade their clients as soon as possible. He believes that the vulnerability might lead to a loss of funds. According to him, the affected CVEs (Lightning Network’s Common Vulnerabilities and Exposures) are;

CVE-2019-12998 c-lightning < 0.7.1

CVE-2019-12999 lnd < 0.7

CVE-2019-13000 eclair <= 0.3

At the moment, the whole scenario of a bug remains unclear but Rusty will share the complete details of the issue in four weeks as soon as the bugs get fixed.

It’s worth reminding that the Lightning Network is a startup founded by Twitter CEO, Jack Dorsey. As a payment protocol, Lightning Network enables transaction at a lightening speed which represents an alternative way to resolve bitcoin scaling issue. This was first started in Feb.2015 by Elizabeth stark and still counts as an early-stage firm in the crypto industry.

However, the latest report reveals that this is available to shop with Shopify merchants. It said that the platform offered this facility for its more than 500,000 merchants with OpenNode. Embracing the feature of Lightning Network, OpenNode CEO Afnan Rahman said;

“Other payment processors have failed to provide a smooth experience for both the customers and the businesses using them and we intend to improve the overall experience,”

Beside Shopify eCommerce gateway, Lightning Network is also integrated with OpenCart, PrestaShop and WordPress’s WooComerce which eventually indicates the growing adoption of crypto-based payments. But in further explanation, Rahman asserts;

“It is important to note that we are and always will be a Bitcoin-only platform and we intend to remain on the cutting edge of the Lightning protocol.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

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