The State of Lightning: More Users, More Capital 💸
A year of massive growth in utility of Lightning payments has lead to the dramatic spike in public network capacity.
Welcome to the November edition of the Lightning Lab, a newsletter filled with Lightning Network updates, community coverage, and, of course, memes! In this issue, we discuss a recent State of Lightning report, why we’ve seen such an explosion in capital allocated to the Lightning Network over the last year, what both mean for builders and investors going forward, and a host of ecosystem news.
The State of Lightning 🤓
Last month, Arcane Research published a State of Lightning report that went in depth on the usage of the Lightning Network.
The report includes an Ecosystem Overview, aggregated transactional data from private Lightning companies, discussion about how Lightning’s growth has impacted the on-chain fee market, and this 🔥 market map.
We highly recommend reading the full report to understand exactly what’s going on in the Lightning ecosystem, where growth is coming from, and what to expect next. The charts are beautiful and the research is comprehensive. As an additional teaser, they tweeted out a summary thread with some of their favorite graphics, and later in the month they even released a version en español!
We look forward to more research institutions producing content like this as the network continues to grow, and are happy that Arcane Research set the bar so high. 🙌
News & Updates
Voltage launched Flow, an API leveraging our Lightning Pool marketplace that will allow node operators to easily purchase channels from other nodes on the Lightning Network at market rates. We’re excited to see the UX around Pool continue to improve, and may have more to share on that in the near future. 👀
Umbrel announced a $3M seed round to continue their mission of bringing the personal server revolution to the world, shifting computing from rooms full of servers owned by corporations to nodes owned by regular people in their homes. Their progress over the last year has been incredible, we can’t wait to see what they do next!
NYDIG @NYDIG_BTCWe're excited to welcome @Bottlepay to the NYDIG team. This acquisition will allow us to integrate their Lightning Network infrastructure into its existing full-stack Bitcoin platform, bringing us closer to fulfilling our mission to bring Bitcoin to all. https://t.co/ryzBjMxUJ9 https://t.co/67iCbE9pPc
NYDIG acquired Bottlepay to integrate their Lightning Network infrastructure into NYDIG’s full-stack Bitcoin platform. Congratulations to both parties as they team up to play a huge role in the next step in Lightning’s evolution. 🤝
LQwD FinTech Corp raised a C$8M financing round from public investors. The Canadian Lightning company plans to launch their commercial Lightning Platform as a Service, then focus on on-boarding clients and providing them with strong connectivity to the Lightning Network.
Cafecito integrated Bitcoin tipping using Lightning. Founded by Argentinian programmer Damian Catanzaro, the tipping platform has become a sensation among local content creators and NGOs in Argentina, reaching over 300,000 users. Lightning will enable Cafecito to expand globally! 🌎
☂️ Umbrel has been a huge contributor to the Lightning Network’s growth. More than 13k users around the world are running Umbrel nodes, almost half of the network!
🦁 Bitfinex shared their September stats and they’re hitting all time highs! Over 10k total Lightning transactions worth around 145 BTC were sent out of the exchange.
🔥 BoilerBitroom, a routing node operator, shared their routing statistics for the trailing 30 days: 358 payments totaling 44M sats ($27k) in the past 24 hours, and 6,822 payments totaling 1B sats ($600k) in the past 30 days.
🌕 Moon’s browser extension broke 10,000 installs. Now thousands of people around the world are using Moon to fund digital Visa cards with bitcoin over Lightning.
🎵Podcasting 2.0 is growing. There are now 2,675 podcasts earning bitcoin through the Lightning Network. Listeners use apps like Fountain, Breez or Sphinx to stream sats directly to the creator every minute. Up only!
🤯 Max Webster wrote an article "Why Lightning, Why Now" on how his bullish thesis on the Lightning Network is now being confirmed by data and explains the bottom up and top down forces that are making its growth go vertical.
⚡️ Strike announced their launch of Pay Me In Bitcoin, allowing users to direct deposit their paychecks and configure the deposit to be partially or totally converted into bitcoin.
🌍 Bitnob is running a hackathon to get developers on board with their Bitcoin and Lightning API. The hackathon is offering $5k in prizes and runs until November 23.
🎨Scarce.City auctioned FractalEncrypt's Bitcoin Infinity Key for a winning bid of 1.05 BTC (over $60k)! The auctioned key was #8 of a set of 21, with all the others being earned by knowledgeable bitcoiners in this tweet thread.
📝Business Insider published an article about Plebnet featuring testimonies from the OG members and their expectations for what's next for the Lightning Network and their community.
🤑 Stacker News, the Lightning-powered social media site, hosted their first paid AMA with Gigi, who was able to stack 100k+ sats by answering questions from the audience.
👀 Impervious offered a sneak peek of the new product they're working on: a browser aiming to be the portal for the P2P internet, with Lightning payments, direct content monetization tools, and more.
🎧 Kevin Rooke started a new podcast about the Lightning Network and his first guest was Oscar Merry, co-founder of the Lightning podcasting app Fountain. They talked about Podcasting 2.0 and how Lightning is an essential piece of the next era of podcasting.
📈 LN Markets built a Bitcoin Options Dashboard where you can trade options directly from your Lightning node.
📹 Clipana is a new tool that allows users to pay sats over Lightning to remove or replace audio from a Youtube video, download it as MP4, convert it to MP3, trim a clip of it and more.
👷♀️ Stephan Livera published a great episode of his podcast with Tony and Jestopher from Amboss to discuss becoming a Lightning Routing Node Operator.
📼 Shocknet launched Lightning.Video, where you can upload content or get a livestreaming key to their global content delivery network with sats over Lightning.
🍻 Mario Havel developed a LNURL/LNbits powered NFC payment tag that was used at #HCCP21 by Paralelni Polis to pay for beers.
🛡️Kollider wrote a piece on hedging, yield and risk management in the context of a Lightning operation. New ways to scale routing businesses are coming fast!
📁 Casey Rodarmor released a new version of his P2P Lightning-powered file exchange app with invoice page improvements, HTTPS support, per-directory file prices and more!
🎏 Bitcoin Fundamentals, podcast hosted by Preston Pysh, interviewed Ben from BTC Sessions and he gave a great explanation on how we're entering the world of streaming sats and how that will change the relationship between content creators and their followers.
🤖 Bitcoin Machines is selling a beautiful plug-and-play Umbrel server. You just need to connect it to your router and turn it on.
🎮 Zebedee now has an Ambassador Program. Anyone who is passionate about Zebedee and shares their vision for a bright future for Bitcoin gaming can apply and help them spread the world while earning rewards in sats.
Lightning’s High Utility-to-Speculation Ratio: More Users, More Capital 💸
Our favorite chart in Arcane’s report is pictured above as it dubbed 2021’s 181% growth in public capacity in BTC terms (now 205% growth one month later!) as the Lightning Network entering its next phase of growth.
However, Lightning Network builders and node operators have known we were in the next phase of this technology for months or years now, but did not have a public metric to point to as the network’s volume occurs off-chain and is thus not published to a global blockchain. As discussed in previous editions, the Lightning Network’s flywheel operates like so:
More users 🔄 more volume 🔄 more fees 🔄 more nodes 🔄 more devs 🔄 more users
Thus, large capital increases in public network capacity are actually a lagging indicator of increasing network activity. Only once the utility of the network has increased past such a threshold that it induces more capital allocation by routing node operators does the public realize how much growth has occurred under the surface. Macro researcher Lyn Alden succinctly explained why this is the case:
Lyn Alden @LynAldenContact@gladstein It's interesting seeing many responses to this tweet compare various speculations to Lightning. Unlike DeFi, Lightning has no token to speculate on, no arbitrage to play with. The more efficient it is, the *less* assets need to be locked up for it to achieve its purposes.
A low utility-to-speculation ratio would mean capital allocators are allocating in hopes of short term profits from price appreciation or external subsidies before any natural utility has appeared. There are of course many examples of this in the broader crypto space, highlighted excellently in Only the Strong Survive by Allen Farrington and Big Al.
A high utility-to-speculation ratio means capital allocators are only allocating after actual utility increases have convinced them of potential profits to be made from providing liquidity. In the Lightning Network context, node operators earn a return based on increased velocity of payments through their channels and provisioning of liquidity to enable transactions. As a result, their allocation decisions are much more dependent on actual utility, unlike a number of other protocols where speculation of the underlying token or external subsidies are the main drivers.
For investors, this means that the parabolic increase seen in the Lightning Network’s public capacity is pure signal. The activity happening on this network is real: people buying pizza and coffee, remitting earnings to family members in foreign countries, and earning via services like Stakwork, Podcasting 2.0, and Lightning-powered games from Zebedee, Thndr Games, and more.
Arcane Research followed up their State of Lightning report with a blog post that continues exploring the theme of utility driving capital allocation.
We can’t say if their prediction will prove to be true for sure, but one thing we do know is that the builders and the makers will be far ahead of those waiting for public metrics to signal growth the next time it goes parabolic. 🤯
Lightning Labs News
Elizabeth Stark spoke about Bitcoin for Billions and building the Lightning Network at the SALT Conference in New York and was interviewed by Bloomberg Live where she discussed the path to enabling native value transfer over the internet and the recent Lightning adoption by large companies and the country of El Salvador.
Ryan Gentry discussed why it doesn’t make sense to compare Lightning to DeFi on Laura Shin’s Unconfirmed podcast, and moderated a panel on Lightning for Plebs at The Atlanta Bitcoin Conference.
Alex Bosworth presented on scaling the Lightning Network with LND at The Atlanta Bitcoin Conference.
Hannah Rosenberg talked about how to create a better Lightning User Experience on the Digital Cash Network.
Do you know ReactJS? Would you like to simplify node management UX while working alongside Lightning devs? We are hiring for a Frontend Application Developer!
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Thanks for reading!