Ah, the Lightning Network. Hailed for years as Bitcoin's saving grace, the off-chain solution needed to finally make Satoshi Nakamoto's "peer-to-peer digital cash" an actual functioning payments network, today appears to be losing faith.
Industry publication Protos recently published an article noting that numerous Lightning developers have walked away from the project, that there's a growing list of complaints and bugs to address and that liquidity has been slowly drying up on the network.
This is all sort of true. Even as far back as 2019 the network's co-creator, Tadge Dryja, was willing to discuss the "limitations" of the scaling solution, and walked away from contributing directly to the project and quitting leading developers Lightning Labs that year (just months after Lightning launched and nearly four years after it was first proposed).
Similarly, Joseph Poon, another co-author of the Lightning white paper, has seemingly become more interested in blockchain scaling solutions happening on other chains, like Ethereum's Plasma. He is now working on a new type of decentralized exchange.
Over the years, numerous bugs have been found impacting Lightning and some of its implementations. In 2022, for instance, bad code in Lightning Labs' favored implementation, LND, prevented users from moving funds onto the mainnet for several hours. (Though to be fair, more often than not vulnerabilities are patched before they're even exploited.)
Other bitcoiners have raised concerns about Lightning's many privacy issues and that the scaling solution often can be surprisingly expensive to use. In particular, they complain about the design of "inbound capacity" on Lightning, which limits the amount of BTC you can receive, so that users sometimes pay to receive funds (or, that payment is subsidized by startups).
The latest round of Bitcoin Lightning discourse appears to have been kicked off by longtime bitcoiner John Carvalho, who was once one of Lightning's biggest champions until he tried building software solutions on top of it. His recent interview with Vlad Costea caught the ear after Carvalho derided the "complexity and fragility" of the protocol.
"Going through that experience has made me realize that the design is kind of a joke," Carvalho said. "We can make it work. We can do our best, but all of the narratives that came with [Lightning] in the first couple years were really exaggerated."
Indeed, it seems like there is a turning tide in sentiment around Bitcoin's Lightning Network, which has been hyped as a potential replacement for Visa's payment rails and the spur that will bring about "hyperbitcoinization."
Inspired by Carvalho's interview, Bitcoin developer Paul Sztorc published a long list of Lightning Network "black pills," including doubts that it could scale to onboard the global population of more than 8 billion people, the "channel risk" of who you interact with, the fail rate of payments, and that amount of bitcoin posted to it is a "microscopic 00.025%" of circulating bitcoins.
Protos further noted the total amount of BTC on Lightning has been dwindling slowly, dipping below the 5,500 BTC level in December 2023 to about 4,750 BTC today. This might suggest that people are abandoning Lightning, though it's worth noting the dollar value contributed to Lightning has doubled to about $320 million today versus $158 million this time last year.
Just looking at the data paints a confusing picture: the number of Lightning nodes is also dipping down from a peak in 2022 as are the number of connections between nodes, and yet the total transaction count has reportedly been trailing up.
Reading the subjective and anecdotal accounts collated by Sztorc, who has been advocating for an alternative way of scaling Bitcoin through "drivechains," paints a more damning picture. All within the past year, highly respected Bitcoin Core developer BlueMatt called Lightning "a joke." Lightning security researcher Antonie Riard left the project (publishing a highly critical blog). And FiatJaf, creator of the popular social network Nostr, spoke of his dwindling confidence.
CoinDesk doesn't pretend to have the answers here, though it would appear that, at best, Lightning's growth is a bit static. But to say public perception has changed on Lightning would likely be to overstate the case; people have been saying for years that Lightning is overhyped and that its fanatics were setting unrealistic expectations.
In fact, Lightning co-creators Joseph Poon and Tadge Dryja said from the beginning that it would not solve all of Bitcoin's scalability needs. There's a reason why the meme around Lightning is that it's always "18 months away."
While it's hard to argue with critics that too much was promised for Lightning too fast (especially during the hype of the last bull market), it's important to put the conversations in context. When the network officially launched in 2019, after years of testing, bitcoiners often warned that it was an "experimental" solution.
Around the time of the first large scale test of the Lightning network — (the "Lightning torch" passed around the world to raise funds after Craig "Faketoshi" Wright sued the random bitcoin supporter Hodlonaut) — there was a trending hashtag warning users that it was #reckless to use Lightning, and to send only an amount you were willing to lose.
There were and still are legitimate complaints about the Lightning network, which should be aired if anything will be improved. It is difficult and expensive to open and close channels. There are numerous security and scalability issues. The custodial solutions that often make Lightning usable for everyday use re-introduce the problems of third-parties Bitcoin was invented to solve.
If there is any saving grace, it is this: When it comes to Bitcoin, often its biggest supporters are its best critics.
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– D.K.
@danielgkuhn
daniel@coindesk.com
