Lightning Network (LN), the most anticipated scalability solution for Bitcoin, is facing a significant crisis of trust. A recent online poll with thousands of users on platform X revealed that more than 80% of participants believe that Lightning is not 'real Bitcoin (BTC).'
The poll has sparked a heated debate between supporters like Alex Gladstein and Matt Corallo, and critics like Paul Sztorc, who claims that the data speaks volumes about the impasse of LN.
Worrying Reality: Key Metrics Stalled
The Lightning Network has been promoted for years as the cheapest way to send and receive BTC while still maintaining full self-custody. Transaction fees on the LN are usually just a tiny fraction of a cent, contrasting sharply with BTC's on-chain transaction fees, which can reach hundreds of basis points for small transactions.
However, despite the rapid growth from 2019 to 2022, network performance has remained stagnant over the past three years. All metrics measuring the health of the LN have been stalled:
Total Capacity $BTC : The total BTC capacity in the public network is approximately 4,800 BTC, equivalent to the level of September 2022.
Number of Network Nodes: The total number of Lightning nodes has also not increased since March 2022.
Number of Payment Channels: Worse, the number of payment channels in the Lightning network has nearly halved since March 2022, from over 80,000 to about 45,000 currently.
Sztorc argues that these numbers are clear evidence. He concluded: “Lightning seems interesting at first—but after the sixth year, you realize it doesn’t work.” He also pointed out the inherent limitations of the LN, such as the requirement for nodes to maintain continuous internet connectivity and users' reliance on large liquidity providers or watchtowers to ensure transaction safety. Sztorc even referred to the Bitcoin Lightning community as a "cult" and concluded that it is "custodial."
Protecting Lightning: Large Volume Transactions
In contrast, strong supporters have stepped up to defend the LN. Alex Gladstein called Sztorc's comments "truly astonishing" and affirmed his belief that LN allows BTC to be used as an effective digital cash.
Matt Corallo also opposed Sztorc, pointing out the high transaction volume of the LN for small payments. He estimates that "more than two percentage points of BTC transactions are currently Lightning," and calls those who deny the success of the LN "disconnected from reality."
Challenges from Centralized BTC-Pegged Assets
Data shows that while the LN has stagnated, more reliable centralized alternatives are thriving.
BTC-pegged assets or wrapped products like Coinbase's cbBTC and spot ETF products are currently dominating trading volumes over transactions on Lightning. Udi Wertheimer pointed out the success of applications like Moonshot, Base, and Fomo, which have quickly attracted millions of users into crypto with transactions using BTC-pegged assets, which have eclipsed Bitcoin's on-chain activity.
The author of the social media poll, who received the agreement of 80% of voters, called BTC in the Lightning network a "separate token on a separate network," although technically, Lightning BTC does not have a separate market capitalization from BTC. To join and leave Lightning, users still need on-chain transactions to open and close payment channels. Once BTC is in the LN, transactions occur off-chain through a network of nodes.
Despite the challenges, initiatives like splicing are underway to alleviate the burden of opening and closing payment channels for everyday users.
