Bitcoin’s Lightning Network has seen a sharp drop in usage since summer, falling by 50%.
The only proposed scaling method for bitcoin, the Lightning Network (LN), had only $12 million worth of assets within the network in July. Now, it’s hardly six million.
Much of the value locked during summer was by one person, LNBIG who put down 336 bitcoins on LN, but it was all costing him too much with LNBIG making just $20 from $5 million locked in LN.
That broken incentives model has been compounded by the complexities of using LN for an ordinary bitcoiner.
LN for example gives errors when someone has a lot of outgoing capacity, but no incoming capacity until some funds are spent. In that case you need to either make a payment first, or use a service that opens a channel back to you.
Then there are routing problems where channels are not big enough for payments or to be routed around. In that case you need to directly connect, so turning LN into a payment channel rather than a network.
This has been running now for nearly two years, but its usage uptake has been as much as that of the tokenized bitcoin running on ethereum.
More recently it was revealed a bug in LN did not even verify if you actually had bitcoin. That’s been fixed, but a site tracking locked assets, Defipulse, showed a sharp drop in value locked within LN (pictured above), down from $6 million to half a million.
It has now recovered with some suggesting this was just a reporting error, while others speculate a client upgrade may have led to Defipulse not tracking properly for a brief period.
Even without this drop, however, usage is down considerably to the point LN is pretty much irrelevant despite it being suggested as the solution to bitcoin’s capacity problem.
That raises the question as to how bitcoin stakeholders will scale the public blockchain now that it has become obvious LN is not a solution.
An answer to that is not readily available, with both Peter Todd and Gregory Maxwell, the chief proponents of not scaling bitcoin, seemingly no longer contributing to protocol coding.
What the current thinking of those who do code bitcoin is now, remains unclear, but as Moore’s Law has advanced considerably, it appears clear some capacity can now be added to the base layer.