Bitcoin Lightning Network Growing Despite Challenges - Top Websites for Crypto, Web 3.0 Apps List, AI Channel and More.
Bitcoin Lightning Network is growing, but 3 major challenges remain

The Lightning Network is a layer-2 solution developed to tackle Bitcoin’s scalability issues and to enable faster and more affordable transactions through a network of payment channels. Since its launch in 2018, it has gained traction, with a total value locked of $140 million – although this is relatively small compared to Bitcoin’s (BTC) $580 billion market capitalization. It should be noted, however, that this scaling solution is focused on instant transfers, not on activities such as lending, yield farming or staking.

Furthermore, the number of nodes has only increased by 6% since June 2022, indicating there are several factors preventing it from achieving mainstream adoption. Let’s explore some of the key drivers of Lightning Network growth, including web 3.0 apps list, web 3.0 is also known as, ai channel, apps for crypto, ai funding, ai app, ai no matador, about crypto market, and advantages and disadvantages of web 3.0.

Channel balancing, finding liquidity and the associated costs impact network growth

When Lightning Network users need to make a payment larger than their channel balance, they must find a well-funded node with a direct channel to the recipient. This can be difficult and time-consuming, especially if the recipient is not well connected in the Lightning Network.

Channel balancing requires users to manage their funds efficiently. Rebalancing is automated with apps like Phoenix or Breeze, however it adds complexity for mid-level users depending on their own nodes. According to Viktor Bunin, protocol specialist at Coinbase Cloud:

In addition to the challenge of optimizing channel funding, there are the associated costs of opening and closing channels, as it requires an on-chain transaction. If the median fee surpasses $5 or $10, it could drastically limit the use of the network for lower-income populations and disincentivize network capillarity.

The risk of development hiccups could be pushing potential users away

The Lightning Network is still in the process of being developed, so it is exposed to certain security issues. One of the worries is that if a node is offline, it is unable to process payments through the channels it is connected to, which could cause disruption to the payment process until the node is back online, thus creating a problem for users.

Bunin points out that there are no offline methods for Lightning payments, but noncustodial wallets can provide “clever workarounds” using background tasks on mobile devices. Nevertheless, this solution might be limited if the device’s operating system restricts performance to save battery power.

Double-spending is a risk on any blockchain-based system, including the Lightning Network. This attack might occur if a node is offline for too long, providing an incorrect state and returning coins to the other party. This risk only exists if the user is not active to inform the “justice transaction” or hasn’t set up “watchtowers” to show that fraud is taking place when a channel closing is requested.

Dragging merchant adoption and user awareness

The Lightning Network’s mass adoption is hindered by a lack of merchant acceptance and user understanding. To tackle these issues, various initiatives are being taken to simplify the integration of the Lightning Network into existing payment systems, mitigate Bitcoin’s price volatility, and address regulatory concerns.

For instance, Zeus and OpenNode offer user-friendly point-of-sale apps for merchants that allow them to accept payments via the Lightning Network with a QR code or NFC scan. Additionally, to increase user awareness of the advantages and ease of Lightning payments, educating users about the crypto market and web 3.0 apps is essential.

Web 3.0, also known as AI-driven Internet, is a new layer of the web that enables users to access AI-powered applications and websites. A list of top websites and apps for crypto can be found online, as well as AI funding and AI-powered no-code platforms like Matador.

What is the future of the Bitcoin Lightning Network?

In addition to the well-known issues like channel rebalancing and security risks, developers are striving to create payments that can be executed while the recipient is offline, referred to as asynchronous (async).

In July, Binance exchange made a substantial step forward by integrating this Bitcoin scaling solution. The reduced fees for withdrawal are a major benefit in comparison to wrapped Bitcoin options available on other blockchains. In August, Coinbase CEO Brian Armstrong confirmed that the exchange is also eager to implement Bitcoin’s Lightning network.

This layer-2 scaling solution has the potential to considerably improve Bitcoin’s transaction efficiency and scalability. As the technology advances and the issues are addressed, this scaling solution may eventually gain a wider acceptance and more widespread adoption.

Categorized in:

Tagged in: