Lightning Network hits record capacity on crypto exchange adoption

Bitcoin layer-2, the Lightning Network, has reached a new all-time capacity high amid increased adoption from major crypto exchanges and functionality improvements. 

Lightning Network (LN) capacity reached 5,606 BTC on Monday, beating its previous record in March 2023, according to Bitcoin Visuals.

LN analytics platform Amboss also reported a capacity peak of 5,637 BTC, worth approximately $490 million, on Tuesday.  

Data shows a surge in capacity in November and December, following a year of declines, as more Bitcoin was added to the network, enabling faster and cheaper transactions.  

The number of Lightning nodes, which open payment channels with each other that are funded with Bitcoin (BTC), was at 14,940, down from a March 2022 peak of 20,700, while the number of channels between those nodes was at 48,678, also down from a 2022 peak. 

The data indicates that more Bitcoin is being added to the LN, but not necessarily a corresponding increase in usage, as measured by the number of nodes and channels. 

More companies are using the LN 

“It’s not just one company that’s putting more Bitcoin into the Lightning Network; it’s across the board,” said Amboss.

It highlighted that large crypto exchanges, such as Binance and OKX, have been depositing more BTC onto the LN this month, explaining the capacity jump. 

Large crypto exchanges have been adding more BTC to the LN. Source: Amboss

Related: Tether leads $8M funding for Lightning startup focused on stablecoins

Stablecoin issuer Tether announced on Tuesday that it has led an $8 million investment round in Bitcoin startup Speed to enable stablecoin payments on the LN. 

Meanwhile, popular crypto wallet MetaMask added Bitcoin support this week, though it stated that transactions would use the Native SegWit derivation path and not the Lightning Network. 

Taproot Assets gets an upgrade 

Lightning Labs announced on Wednesday that it had upgraded Taproot Assets to v0.7, enabling reusable addresses, a fully auditable asset supply, and larger, more reliable transactions.

Taproot Assets is a multi-asset Lightning protocol enabling assets like stablecoins to be minted on Bitcoin and sent over the LN.

Stablecoins currently live mostly on centralized or less secure networks, so Taproot Assets enables them to leverage Bitcoin’s security while achieving instant, low-fee transfers through the LN. 

The new auditable supply feature ensures transparency without requiring trust. Essentially, this could help Bitcoin and Lightning become a multi-asset network, said Lightning Labs. 

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