30s Summary

A recent Amboss Technologies study revealed that the value of the Lightning Network, a ‘second layer’ to Bitcoin, fluctuates with Bitcoin’s price. The study hinged on the concept of ‘max flow’, indicating how many transactions can concurrently occur on the network. The increased value of Bitcoin allows for larger transactions on the Lightning Network. As the network’s capacity expands, more players could use it to facilitate larger transactions with less fees. The Lightning Network currently has a locked value of over $346 million, standing as the third-largest protocol integrated with the Bitcoin network.

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A recent study has found that the worth of the Lightning Network, which is basically like a second layer to Bitcoin, actually changes depending on Bitcoin’s price.

To understand this, we need to know about something called ‘max flow’. This is a way of seeing how many transactions can happen at once in the network. Max flow shows the Lightning Network’s value is growing alongside Bitcoin’s value, says Jesse Shrader, the big boss at Amboss Technologies.

According to Jesse, although the Lightning Network is currently made for small payments, as Bitcoin becomes more valuable, you can start making larger payments that work just as quickly. So, as Bitcoin’s value increases, it’s like your dial-up internet just became super-speed broadband.

Important to note that max flow isn’t just about the number of nodes (or points) and channels in the network. It helps measure how good the Lightning Network is at carrying Bitcoin payments. By looking at how likely it is a transaction is successful, max flow helps highlight any issues and improve how well the network works. For example, if a channel can carry 0.1 Bitcoin and Bitcoin is priced at $50,000, that channel can carry a $5,000 payment. But, if Bitcoin’s price doubles to $100,000, it can carry a $10,000 payment without any changes.

As the Lightning Network’s capacity grows, it could attract more big players to use it. This is because increased capacity means larger payments can be made with less fees and without having to make transactions directly on the Bitcoin network. This reduces costs and makes transactions easier, which could lead to more offchain transactions among big organisations using Lightning for settlements.

Based on data from DefiLlama, the value locked in the Lightning Network is now over $346 million, making it the third-largest protocol built on the Bitcoin network.

Source: Cointelegraph