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Activity on Bitcoin’s Lightning Network May Be Misleading

Not all network activity is created equal.

Bitcoin's lightning network capacity is decreasing

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A recent report from BitMex revealed several critical points about activity within Bitcoin’s Lightning Network. At first glance, readers glean that this activity is much higher than expected. Upon further investigation, however, the story is far more nuanced.

Trials with Bitcoin

The data shows that non-cooperative channel closures within Bitcoin’s Lightning Network made up much of the activity on the network. BitMex reported an estimated total of 60,000 non-cooperative channel closures in the history of BTC, with over 1,000 BTC spent in total for these transactions.

Indeed this represents a high-level of activity on the network, especially when it appears that the analysis had not captured the entirety of all private channels in the network. But, when looking deeper into the nature of non-cooperative channel closures, another insight is made clear. 

First, it will be helpful to understand what these closures are. 

A non-cooperative channel closure is one in which a member of an open channel decides to leave, and thus get back their holdings. These funds are redeemed during a sweep of the channel, and, for the purposes of the BitMex report, offer analysts far more data points to measure activity.

This is because data drawn from 1ML or TXStats only represents active nodes and open channels that are public. 

By examining non-cooperative channel closure data, one can also extract novel conclusions from private channels such as mobile wallets. Still, the results must be taken with a grain of salt. It is uncertain as to the exact number of channels that are active within the Lightning Network. 

It is for this reason that the report indicates a lower and upper bound estimate for non-cooperative channel closure data. 

The lower estimate suggests a total of 59,508 total transactions that traded 1,074 Bitcoin. The upper bound suggests a total of 90,667 total transactions that traded 1,405 Bitcoin. The report reads: 

The volume of transactions here is quite large and may indicate more experimentation with lightning than many expected. The data also indicates non-cooperative closures are more of a common closure type than people think.”

The operative word in this conclusion is “experimentation.”

After posting the report in Reddit’s r/Bitcoin subreddit, Bash Co, a noted Bitcoin advocate and developer, responded that much of this activity is likely chalked up to developers testing the system. 

Others confirmed that they had either opened up multiple channels for this very reason. One user named whitslack cited technical difficulties. 

They wrote:

I’ve contributed many dozens of unilateral closes to this total. The vast majority of them occurred because my node requested to remove a failed HTLC from a channel but the peer never followed through. My node is then forced to close the channel unilaterally to recover the funds before the HTLC expires.”

In the above case, the user was forced out of the network due to poor connectivity rather than spending their BTC on a cup of coffee. It also reminds users that not all activity is the same.

Although headlines surrounding this analysis will report high activity and focus on the Lightning Network’s privacy features, the real story holds that development around the Layer 2 solution is still far from polished. 

Like most of the sector, the Lightning Network is still gathering data on the latest experiments.

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