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The falling lightning capacity of Bitcoin may not be a bad thing

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If you are a bitcoin fan and the upcoming Lightning network, this graph looks daunting at first glance.

lightning chart
Graph of lightning capacity from The orange line is the BTC capacity; the blue line is the dollar value.
The lightning network is supposed to be the bitcoin superhero and to bring the cryptocurrency to new heights by tackling the most difficult and obvious problem: if cryptocurrency ever goes mainstream, it has to support a million times more transactions than it currently does – which is not an easy feat.

But the appearance of this graph seems to lose lightning power. The amount of funds trapped in the low-two network seems to be declining, suggesting that fewer people are using it as a payment method. A lightning fast channel is like a gateway to the rest of the network, allowing a user to send a payment to another user.

Although lightning is still considered ‘beta’ software and therefore risky to use, bitcoiners are so enthusiastic about it and use it anyway, for games and beyond, to sing the unofficial slogan ‘recklessly’. The capacity of lightning increased rapidly in the first year, devotees welcomed it on social media.

The catch is that although this number is decreasing, lightning use may still be increasing due to the increased privacy of lightning channels and other channel optimizations.

“There is no way to know the capacity in [the lightning network]. We can only know the capacity of the public channels, not private, “Roy Sheinfeld, CEO of Breez told CoinDesk.

And at least one company says that – at least in their experience – attract lightning payments.

“We are doing more and more dollar value volumes on the lightning network. What I see is that the price is going up and so people need fewer coins trapped in canals to maintain purchasing power, ”MD Fastanny Danny Brewster told CoinDesk.

A story of two nodes

So while this number has so far been a spectator sport – football for tech nerds – it may not be long. This number becomes more difficult to follow over time.

That is because many lightning portfolios do not advertise by default or their channels exist for the rest of the network.

Under the hood there are “advertised” channels that advertise their existence for the rest of the lightning network and “non-advertised” channels that don’t. Normal channels used by ordinary users who just want to buy pizza and draw dicks online with lightning do not need to be advertised.

“In recent months, many portfolios have been issued that are standard for non-advertised channels. These channels do not appear on public statistics, so relying only on public statistics shows only half the picture,” CTO Lightning Labs Laolu Osuntokun told CoinDesk.

In general, advertised channels only need to be used by routing nodes, so the more robust nodes that receive payments from one person to another and always need to be online.

Zap maker Jack Mallers argued “it is only responsible” that “anyone who is not a routing node uses [private] channels” that are not advertised “.

Some even go so far as to claim that public capacity is a “useless indicator” because not all – or perhaps even most – of the money is captured in the lightning network.

As more apps started to follow these best practices, Sheinfeld suspects that “most” channels are private, and notes that his wallet Breez has opened “thousands” of private channels in the last few months alone.

“Breez opened thousands of private channels in the last two months. The Lightning Labs autopilot also opens private channels, “he said.

This is why many developers see lightning as offering more privacy than on-chain bitcoin transactions. Although bitcoin has a reputation of giving users anonymity, transactions are actually public. Lightning hides a little more from the transaction data.

“If a regular bitcoin transaction is similar to uploading your bank statement to a public website, a lightning network transaction is similar to showing each trader that you pay how much money you have in a specific compartment of your wallet. You still reveal some information, but much less, “as the lightning-fast startup SuredBits wrote.

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Garbage day

Another reason that capacity is decreasing is because some entities shut down lightning channels that were wasteful.

“Based on my knowledge, the decrease in channels is simply the fact that node operators are rational by closing channels that have been open for some time but that have no notable forwarding activities,” said Osuntokun.

For example, there is a famous and mysterious anonymous lightning user named LNBIG who has opened many lightning channels. They debuted initially by pouring 300 bitcoin into the lightning network, which gave a new meaning to the “reckless” slogan of lightning.

“At the start of my activity, I opened many channels in the hope that they will be used (and due to the imperfection of the autopilot),” the person behind LNBIG told CoinDesk.

But, the secret developer said, those channels were not used much at all. They were just open and sat there.

“But time has shown that many channels have not been used for two to four months, and the funds in it have nevertheless been blocked,” LNBIG continued.

The funds are “blocked”, as LNBIG says, because of the way lightning works. A lightning fast channel is like a gateway to the rest of the network, allowing a user to send a payment to another user. But when someone opens a “channel” with someone else and doesn’t use it, other people can’t use that gateway.

So it makes sense to free up that capacity and wait for a new channel to be opened that wants to use the capacity, and that is exactly what LNBIG decided to do.

LNBIG conducted a Twitter survey before continuing to close these channels, arguing that the only drawback would be the “psychological effect” that lightning capacity would drop to 825 bitcoin.