Many bitcoin miners are not paying attention to the Lightning Network. However, 2022 showed us that the network is here to stay, even if it is still in the research and development phase. In this blog post, we will explore what the Lightning Network is, its current adoption, and why miners should care.
Lightning Network Overview
Introduced in 2015, the Lightning Network was hailed by many as the final step towards hyperbitcoinization. However, the past year has seen an increase in debate around its viability. More than four years after the network’s first transaction, the question remains: how much is Lightning actually being used for payments?
The average bitcoiner uses Bitcoin for investing or saving and traditional fiat payment rails for spending. In developed countries, citizens benefit from highly integrated and sophisticated fiat payment networks. In contrast, Lightning is far from being as easy as quickly tapping to pay and walking away. Routing errors frequently occur, making it less preferable than mainnet Bitcoin payments.
El Salvador’s attempt at bitcoinization is instructive for what Lightning adoption may look like. The younger generation was far more receptive to Bitcoin and was ready to accept Bitcoin through mainnet or Lightning. The older population, however, seemed equally flustered by both mainnet Bitcoin and Lightning transactions, often requiring assistance to get their Bitcoin wallet accessible.
Why Miners Should Care
Lightning developers and advocates are not waiting around. Lightning node count and network capacity are growing at parabolic rates. With an estimated 500 TPS per node, increases in nodes and network capacity cause the LN to have cheaper and faster payments. In some cases, Lightning is already proving to be a faster and cheaper alternative to Visa. If the Lightning network continues to scale and becomes easier to use non-custodially, the Layer 2 network’s settlement volume may start to rival mainnet.
Bitcoin miners with smaller, at-home setups (<1,000 TH/s) stand to benefit strongly from a greater adoption of Lightning payments, specifically for mining pool withdrawals. Mining pools that incorporate lower withdrawal minimums, facilitated via the LN, will attract smaller miners that wish to save on payout fees and/or increase payout frequency.
In conclusion, the Lightning Network is still in its early stages of adoption. While there are challenges to overcome, the potential benefits of Lightning adoption are clear. As Hashprice continues on its long-term trajectory toward asymptotic zero, smaller miners can raise their margins and increase payout frequency by using a mining pool with Lightning payouts. The next five years may bring the innovation and adoption of the Lighting Network that bitcoiners have been eagerly awaiting.