Explore the surge of Lightning Network transactions due to Bitcoin mempool congestion. Discover Bitfinex’s observations, and the impact on nodes, channels, transaction times, and fees.
It was inevitable: there has been a significant increase in transactions across the Lightning Network as a result of the congestion issues on the Bitcoin mempool. Particularly Bitfinex, one of the first cryptocurrency exchanges to handle BTC transactions over LN, has noticed this. When LN was not widely used in 2019, the exchange took this action.
Back then, there were less than 5,000 nodes and less than 32,000 channels globally, whereas today there are more than 18,000 nodes and channels have increased to around 80,000. The fact is that due to the memory pool congestion, both the average time to validate transactions and the cost of fees for individual transactions have risen.
Let’s just state that, compared to the daily average of about 600,000 approved transactions, there are currently more than 400,000 transactions in the mempool that need to be validated.
Lightning Network as a fix
The mempool congestion issue with Bitcoin has a solution.
It is the Lightning Network, which serves as Bitcoin’s primary Layer-2 and allows for instantaneous transactions at a very low cost and does not currently have any significant capacity restrictions.
In actuality, 18,000 nodes are able to process much more transactions than even the current high demand and on-chain miners can.
If validating every transaction in the mempool could take close to 24 hours, it would only take a few hours or a few minutes with LN.
Furthermore, due to the low fees, some of the 400,000 transactions left in the mempool won’t be validated within 24 hours; nevertheless, if they had been completed using LN, they probably would have already been validated.
Activity on the Lightning Network is booming
Paolo Ardoino, CTO of Bitfinex, said:
Lightning is well-placed to ease congestion issues on the Bitcoin network. At Bitfinex we saw 11,000 transactions in the past 30 days and I expect this will only grow. We need more exchanges and more users of exchanges to push for Lightning in order to benefit from faster speeds and at much lower costs. Blockstream’s Liquid network is also a good secondary layer that can help in situations where mainchain is congested.
These numbers clearly demonstrate that there is still a very small total use of LN, even while there is a rise in its use on the one hand.
On the other hand, the Bitcoin mempool would probably not be crowded if it were heavily used.
The mempool may also be swiftly drained if this protocol were to be deployed because BTC transactions made using LN do not go through the blockchain or the mempool.
It’s also crucial to keep in mind that LN transactions cannot have public statistics on them because they do not pass through the open Bitcoin blockchain.
The number of transactions that pass through a node may only be ascertained by the node owner, and this information is private until the node owners make it public.
LN’s still infrequent use
Given all of this, it begs the issue of why LN usage is still so restricted.
First off, LN cannot be used to exchange Ordinals, the Bitcoin inscriptions that generate the majority of the congestion, as they must go through the blockchain.
Additionally, using regular wallets to transact BTC via LN is not viable; you must use specialized wallets, to which you must transfer some of your BTC.
Last but not least, a channel must be formed in order to use an LN wallet, and doing so necessitates a blockchain transaction. This is now slowing down the development of additional LN channels.
We must therefore wait until the Lightning Network is widely used, hoping that the mempool congestion issues with bitcoin do not worsen during that period.
It is worth mentioning that the amount of transactions waiting on the mempool has actually dropped since yesterday, thus for now the problem seems to be steadily disappearing.
However, since July 2021, the average transaction fee for bitcoin has been much higher than for Ethereum.