For the first time, the Lightning Network – a layer 2 payment product built on top of the Bitcoin blockchain that allows for
secure, private, and near-instantaneous transactions at low to no cost – has
surpassed 25,000 active nodes, indicating that the network is becoming stronger
as more nodes and channels are added.
The number of active nodes has increased by 8% to
25,010 in the last 30 days. A node is a network "user" who configures
their computer to communicate with other nodes. They may then transmit, verify,
and receive data — in this instance, bitcoins – in this manner.
The Lightning Network does not have a central data
server that records all of the transactions or interactions between users since
it is a decentralized network. Instead, the data, or at least a portion of it,
is tracked by a decentralized network of dispersed nodes.
The Lightning Network enables users to transport
transactions via off-chain channels, which helps to decrease congestion on the
Bitcoin blockchain. All transactions that travel via a channel are rewritten
into a single transaction and settled on the Bitcoin network in a couple of
seconds. These channels link the nodes that have opted to join in this manner.
However, not every node uses a channel. Currently,
14,419 nodes have channels, accounting for approximately 58 percent of all
nodes. The remaining 42% are just there, at least for the time being.
There is, however, the possibility of earning
income for individuals who want to establish and finance a Lightning Network
channel.
The Lightning Network's earning yield
Node operators must “fund” a channel with a modest
amount of BTC in order to open it. The average financing amount is now about 0.035 BTC. The value of every transaction that may be routed via that channel
is equal to whatever amount is in that channel. When a transaction passes via
one of their channels, node operators get a modest fee in exchange for
providing channel liquidity.
Not every node in the Lightning Network is linked
to every other node since it would require much too much storage per node. In
order to discover a route to its ultimate destination, a transaction must
typically “hop” across channels, from one node to the next. To do so, the
Lightning Network employs onion routing, a privacy-focused network secured by
encryption that enables a transaction to bounce from node to node until it
reaches its destination.
Each hop across a channel is charged separately,
thus the fewer the hops, the better. The average hop distance is now 8.8 hops.
According to statistics from 1ml, the number of
channels has risen to 65,739 and their capacity has increased by approximately
78 percent, from 1,800 to over 2,300 BTC, since we last reported on July 15.
There are more connections between the nodes as the
number of channels increases. Because each node hop incurs a charge, having
more channels accessible improves the likelihood of finding a more efficient
path to the transaction's ultimate destination. As a result, improved
connectivity may significantly decrease the costs of transmitting transactions.
Greater connection and channels also means more
competition in terms of transaction facilitation. The average charge is now
lower than the basic fee. Despite the fact that the basic cost for traveling
through a node's channels is 1 sat, the median fee is just 0.000006 SAT/SAT
spent, or $0.000000003018/SAT spent. (A “sat” is a satoshi, bitcoin's smallest
unit.)
Furthermore, increased network capacity indicates a
better established network since it indicates that users have collectively
"invested" in the network. Each channel must be sufficiently financed
in order for transactions to hop from node to node. The greater the capacity,
the greater the amount of money that can be transferred.
Forces at work
The rise is due in part to the growing demand for a
solution to Bitcoin's scalability issue, which says that the base layer can
only handle seven transactions per second. Big names in crypto have taken
notice of layered networks like Lightning and sidechains like Liquid, including
Twitter and Square CEO Jack Dorsey, whose Twitter user name now incorporates a
Lightning bolt for the Lightning network.
The Lightning Network made news earlier this summer
when Jack Mallers, CEO of payments firm Strike, revealed that bitcoin had been
approved as legal currency in El Salvador. Mallers' Lightning-based payment
software Strike was deployed throughout the nation in collaboration with El
Salvador's president, Nayib Bukele.
Mallers is now taking a hard line against large centralized exchanges like Coinbase by lowering bitcoin buying costs on its app to near nothing. All of these significant actions demonstrate his commitment to promoting Bitcoin's development as well as drawing attention to Strike and Lightning.
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