Why Lightning Network’s Capacity Has Dropped by Over $20M in Just Two Months
If you’re familiar with Bitcoin, you may have heard of the Lightning Network (LN). It’s a second-layer scaling solution that aims to make Bitcoin transactions faster and cheaper. Instead of recording every transaction on the Bitcoin blockchain, LN users create a shared “channel” for their transactions. Only the opening and closing balances of these channels are recorded on the blockchain. This year, the LN reached a record high in terms of capacity or total value locked (TVL) in open channels.
On July 6, 2023, the LN’s capacity reached 5,468 BTC. However, since then, a significant amount of BTC has been removed, resulting in one of the largest declines in LN history. Starting from July 9, around 786 BTC (equivalent to $20.32 million) exited the LN, causing the capacity to drop below the 5,000 BTC threshold after July 10. Currently, the Lightning Network’s capacity stands at 4,682 BTC, valued at $121 million.
Additionally, another network called Liquid, created by Blockstream, has also experienced a decline in capacity this year. In March 2023, the Liquid network held 3,556 LBTC, but by September, this number had dropped to 2,736 LBTC. The reason behind these declines in both networks is uncertain, but a total of $41.52 million worth of bitcoin has been withdrawn from both networks.
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