The Lightning Network was released over a year ago. Since then, many applications based on this promising technology have emerged, around which a significant user base has already grown. Recently, Bitfury announced the launch of a suite of solutions for the Lightning Network. Why is big business betting on technology that is still in an early stage of development?
Lightning Network is considered one of the most promising second-layer solutions for the Bitcoin network. In particular, it should help cope with the problem of scaling and speed of transactions and become a guide to the world of mass payments for Bitcoin. Following this concept, our editors experimented with paying for a cup of coffee using the LN transfer at the end of 2017 and faced some difficulties back then. How much has the technology advanced in a year?
The adoption level of the Lightning Network is proliferating and remains a popular source of good news during the “crypto winter.” According to the website P2sh.info, the number of channels (in fact, users) has increased from 12,500 to more than 44,000 since the beginning of November last year. The network capacity has increased by seven times to almost 1,065 Bitcoins. This suggests that payment activity on the Lightning Network is indeed growing.
What can we say about the geography of the Lightning Network? According to the 1ML portal, the U.S. is currently leading the game as more than 5,000 channels have been opened in Ashburn, Virginia alone. Also among the leaders in the activity of the Lightning Network are Germany and France.
The number of nodes on the Lightning Network is also increasing and reached 7,000 at the beginning of March. One of the owners of the LN nodes is Twitter founder Jack Dorsey. He also supported the Lightning Torch flash mob and even announced that his crypto payment application Square will support the new technology. At the same time, the danger of centralization cannot be forgotten, as the ten largest LN nodes account for 38% of the payment capacity of the entire network.
Big Business Takes the Stage
The rapid growth in popularity of the Lightning Network demonstrates its potential, and now the large blockchain corporation Bitfury has joined the race for users. In late January, it released a beta version of several products, united under the brand Lightning Peach.
Bitfury products for Lightning Network are divided into three areas. Individual users are offered desktop and mobile wallets. Sellers, an API and a plugin for receiving payments; the payment terminal is promised, but aside from the technical specifications, nothing is yet known about it. There was also a proposal for developers in the form of Lightning Peach Daemon, a partial implementation of the Lightning node in the Rust language. In conclusion, Peach introduced its own public node available for connection. Thus, unlike competitors, Bitfury offered a whole suite for the entire business cycle on the Lightning network.
As the head of the Lightning Peach team, Pavel Prikhodko, said, their company was the first to offer not a separate product, but “the entire infrastructure stack” for working in the Lightning network. Now Bitfury is working on two lines of LN products that are non-custodial for “expert users” and custodial for those who want to use but do not intend to “dive deep into the technology.”
Anton Kumaygorodsky, who developed Lightning Wallet, the most popular LN wallet on the Android platform (according to Google Play statistics), considers Bitfury, whose main business is mining, to be successful: “Everything that can help Bitcoin will help them in one way or another. In addition, mining is a very competitive environment, and an attempt to gain a foothold somewhere else seems logical. The ‘Miner–LN’ bundle should work well, and it is possible to offer new services on its basis: for example, open up channels to those who want from the mined Bitcoins.”
Bitfury points out that companies that develop products based on the Lightning Network do not necessarily compete with one another: “In order for Lightning to work, you need your own infrastructure. It opens up new scenarios for the use of cryptocurrencies, which, of course, creates space for a new business. Large companies like Bitpay can gradually expand in the direction of supporting Lightning. At the same time, there are scenarios where on-chain transfers [of Bitcoins] remain preferable,” Pavel Prikhodko believes.
What Is the Lightning Network Missing?
Meanwhile, the fans’ dreams of paying with the help of the Lightning Network for the goods at stores are shattered against existing shortcomings.
In addition to obvious technical difficulties, the size of the payment cannot exceed 0.04 BTC, or about USD 160, and many user solutions are released only in beta, which leads to frequent bugs.
For example, during the review of BlueWallet, blogger Ben Perrin, known by the nickname BTC Sessions, was faced with the fact that his LN account was credited with twice as much money as he sent. Although application developers promptly fixed this bug after Perrin’s message, it is yet another indication of the unreliability of LN applications. Some users, on the contrary, lost their funds.
Anton Kumaygorodsky is sure that it is still challenging to use Lightning network applications because the network lacks “many important components,” such as splicing (increasing the channel capacity by sending on-chain transactions to it) or AMP (being able to split one payment into several small ones to increase network bandwidth): “Work on all this is going on, and I think, as the protocol improves, interest in ‘Lightning’ will grow, too,” he notes.
Members of the Lightning Network community offer solutions to improve the user experience. For example, Lightning Labs CTO Laolu Osuntokun published a draft of the update at the end of February, which will allow users to create static LN addresses so it will be easier for users and merchants to process repeat purchases.
And yet, every day the protocol “is becoming more and more mature,” Pavel Prikhodko is sure: “We expect interesting stories as early as 2019, where it will all work meaningfully and create value. In fact, Lightning is now practically the only area in the crypto where all development metrics are in the green zone.”
Not Just for Buying Coffee
Kumaygorodsky is confident that, although the Lightning Network is better suited for payments than Bitcoin’s on-chain transactions, it is unlikely to be able to compete with bank cards in everyday purchases. But the Lightning Network has potential in narrower areas of application: “For example, traders could use it for arbitration between exchanges,” he suggests.
A striking example of the unusual use of Lightning Network is the Tippin app, which is a Twitter add-on and released in the form of an extension for the Chrome browser. By using it, Twitter users can award “tips” to authors of successful tweets.
Twitter user Kevin Rooke cited statistics, which was confirmed by Tippin creator Sergio Abril: three months after the release of the application, over 14,000 people registered in it, and the browser extension was downloaded 4,000 times. In addition, the project on the Lightning Network technology was once again supported by Jack Dorsey.
Pavel Prikhodko added that the company sees “big interest” from the business side to try LN-based services. In particular, “this applies to countries with a weak banking system or cases with international transfers.” Bitfury found it difficult to name the approximate number of entrepreneurs using the technology but noted that LN is actively testing various business scenarios, including donations, tips for content, or micropayments.
For the usual “hodler,” it is still difficult to use applications based on the Lightning Network. Bitcoin evangelist Andreas Antonopoulos believes that their mass adoption will begin in two years.
“I think mass adoption will come when, first, the use of the technology becomes really convenient, and second, people can directly benefit from it, for example, by using it for cashbacks or micro earnings,” concluded Pavel Prikhodko.