Faster Speeds To Lower Fees, How Bitcoin’s Lightning Network Transformed Transactions In 2022
By Benzinga
Bitcoin (CRYPTO: BTC) experienced a tumultuous 2022, with price crashes and crypto collapses making headlines. Yet, this was also a year of immense progress for the world's largest cryptocurrency.
What Happened: The Bitcoin Lightning Network, a critical scaling protocol enabling near-instant, low-cost payments off-chain, underwent significant growth and evolution. We take a look at the Bitcoin Lightning Network and how it changed in 2022.
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The Lightning Network is a revolutionary technology for Bitcoin (or satoshis, the smallest denomination of a Bitcoin) transactions. By increasing the capacity of the network, users benefit from faster payment speeds and larger transaction volumes, which come with lower fees.
Since its creation in 2018, the Lighting Network has seen immense adoption beyond its critics' expectations, with 4,000 BTC capacity in June and successful usage in locations such as El Salvador, the Isle of Man, and Gibraltar. Even Bitcoin influencer Udi Wertheimer, who had previously expressed doubts about the network's viability, has been forced to concede its “success”.
The Lightning Network is totally decentralized and improves Bitcoin's scalability. The publicly visible liquidity capacity rose from 1,058 Bitcoins to more than 4,771 Bitcoins in 2022. The number of Lightning Network channels increased by an impressive 80%, from 37,298 to 67,339 channels, as per 1ml.com lightning network tracker. Additionally, the number of public Lightning Network nodes rose by 88%, from 8,295 to 15,636 nodes (though the rate of growth slowed in the second half of the year).
New Protocol, Technologies: This year, Lightning Labs unveiled Taro, a protocol proposal for the Bitcoin and Lightning Network to allow for the minting, sending and receiving of assets. Taro leverages the latest Bitcoin protocol upgrade, Taproot, to enable the issuance of practically any kind of asset on the Bitcoin blockchain that remains backed by the unchangeable security of Bitcoin’s proof-of-work consensus mechanism. This opens the door for increased use cases and enhanced functionality on the network, such as the issuance of stablecoins, stocks and bonds on top of the Bitcoin protocol.
Impervious Technologies unveiled the world's first Web Browser powered by Bitcoin's Lightning Network. This Peer-to-Peer Browser offers a comprehensive set of communications, data transfer and payment tools without any centralized intermediaries. These include end-to-end encrypted messaging, video calls, collaboration platforms, decentralized identity management, data storage and giving users the opportunity to monetize their data.
Last but not least, Value-4-Value, an innovative approach to content publishing that rewards the creator with value after their customers enjoy the content. By leveraging the Lightning Network and utilizing solutions such as Lightning Addresses and Bolt-12 invoices, over 10,000 content creators have already implemented Value-4-Value on their podcasts.
Rene Pickhardt, Bitcoin Lightning Network developer, told Benzinga that the major breakthrough for the Lightning network was in March when he developed a new approach to massively improving lightning payments reliability.
Pickhardt’s research suggested that approaching the payment splitting process as an optimization problem can provide both reliability and cost-efficiency, leading to better outcomes.
The Future: A new report by Arcane Research titled “State of Lightning” says that the Bitcoin Lightning Network could have an astounding 700 million users by 2030.
According to this report, gaming and streaming video and audio will be major use cases for the Lightning Network, with streaming services like Spotify and Netflix utilizing it for micropayments in order to offer per-minute or per-second streaming services. With that kind of usage, the Lightning Network could revolutionize the digital payments industry — and change the way we consume media.
Price Action: At the time of writing, Bitcoin was trading at $16,842, up 0.02%, according to Benzinga Pro data.
