Happy Birthday to the Lightning Network: The Story So Far by Alex Lielacher
On January 14, 2016, developers Joseph Poon and Thaddeus Dryja released a whitepaper titled "The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments," which described a proposed Bitcoin scaling solution that would help decongest the heavily burdened Bitcoin network.
Towards the end of 2016 the cryptocurrency sector started to attract mainstream attention and the start of the ICO craze lured in many new participants. Unfortunately, the increased demand on the most valuable digital currency, Bitcoin, resulted in the decreased effectiveness of its network.
The Bitcoin network continued slowing in 2017 as it struggled to keep up with user demand. There were reports of transactions taking longer than a day to be confirmed. Users were advised to include high fees on their transactions to increase the chances of miners attending to their transfers. However, even then it was not guaranteed that the confirmations would come in a timely manner.
To remedy the situation, the bitcoin community considered a number of solutions. The first proposed solution was the controversial Segregated Witness (SegWit) proposal. On October 27, 2016, Bitcoin Core developers released the first version of SegWit. After its implementation in mid-2017, the solution laid the foundation for other second layer solutions on the Bitcoin network.
Here comes the Lightning
The Lightning Network was another proposed scaling solution made possible on the Bitcoin network through the implementation of SegWit. In the Lightning Network whitepaper, the developers described their motivations, stating: "The Bitcoin blockchain holds great promise for distributed ledgers. But the blockchain as a payment platform, by itself, cannot cover the world's commerce anytime in the near future."
The protocol described a system where only the most necessary information would be stored on-chain. The Lightning Network would be composed of paths they called payment channels, within which users could transact an unlimited number of times. However, the main Bitcoin network would only record and store the first and final amounts held in the wallet attached to a channel. In the protocol, the reduction of transaction data would serve to significantly increase speed within the Bitcoin network without "bloating up the blockchain or creating trust in a centralized counterparty."
Lightning Labs released an alpha version of the Lightning Network Daemon on January 10, 2018, and released the beta version a couple of months later. At the time, concerns from the cryptocurrency community centered around the fact that the implementation of the protocol on the Bitcoin network would rob miners of their transaction fees and could eventually weaken the robust and decentralized system. However, developers argued that the LN was likely to be used for low-value transactions which miners were avoiding anyway.
Uptake was slow initially. However, by the end of 2018, statistics showed that the capacity of the network had surpassed $2 million. The network hit this milestone on December 23, 2018, according to data provided by bitcoinvisuals.com, when the channels in the network facilitated transactions worth 496.8 BTC.
The Bitcoin Lightning network continued adding unique channels, with 14,352 by the end of 2018. Moreover, a number of altcoins such as GroestlCoin, Syscoin, Vertcoin, and Litecoin now support the Lightning Network scaling protocol on their blockchains.
On the anniversary of the release of the LND, Lightning Labs reiterated that the network had witnessed significant growth stating: "Today marks the first anniversary of the LND mainnet beta! Thanks to our community, devs, testers, and everyone else who's helped with the incredible growth of Lightning. If we can do all this in one year, just give us a few more."
A split community
Depending on who you ask, the Lightning Network is either a resounding success or a failure threatening to destroy the very fabric of Bitcoin. The cryptocurrency community has been split on the efficacy of the scaling solution. Sentiments range from the opinion that the LN is impressive to the network is centralized and bank-owned.
The community-led Lightning Torch initiative was launched to show support for the Bitcoin LN. Also called the Lightning Network Trust Chain, the Lightning Torch was started by a pseudonymous Twitter user called Hodlnaut on January 19, 2019. According to its originator, the initiative is designed to raise awareness of the existence as well as the efficacy of the LN.
While the initiative started on a whim as a joke, it has now become a symbol of community support for the Lightning Network. Hodlnaut began the program by sending 100,000 Satoshi to a user he chose and then tasked the recipient to send the original amount with an additional 10,000 Satoshi. Reminiscent of the passing of the Olympic torch, the initiative has been a success.
The Lightning Torch has jumped from one user to another, attracting 249 unique participants, including noted cryptocurrency, thought leader Andreas Antonopoulos. While the Lightning Torch was stolen once, the initiative is a success according to LN supporters with one person explaining: "The #LNTrustChain showed the world: 1. Lightning works and it's amazing. All of us who've used it in a solo context (buying stickers, playing games, etc) already knew it, but this experiment was the first widespread public demonstration of its power." The group plans to donate the final amount to a charity.
A noted supporter of the protocol is Litecoin creator Charlie Lee who in the past said: "[Lightning] will build bridges over the highways. But a side benefit is that these bridges will connect both highways together." Another big name who showed support for the Lightning Network is Twitter CEO, Jack Dorsey. Through the LN-enabled Twitter tipping bot called Tippin, Dorsey endorsed the scaling solution.
For all the obvious enthusiasm, a vocal portion of the cryptocurrency community continue to express skepticism. For instance, when Lightning Labs posted data regarding network usage on the March anniversary, one user responded by saying: "Maybe no one will notice the four charts that are missing on that site: Number of successful payments made per day. Average value of successful payments. Average number of paths tried for each successful payment. Number of attempted payments that failed to go through." Others within the community agree with these sentiments, such as Udi Timechainheimer, co-host of crypto-focused podcast Reckless Review, who claims the network metrics provided by Lightning Labs are 'irrelevant' and misleading.
While the cryptocurrency community seems split on the real world usage and efficacy of the Lightning network, the scaling solution continues to add new users and create unique channels.