Lightning Network Value Correlates With Bitcoin Price

According to Cointelegraph, the value of the Lightning Network is directly linked to the price of Bitcoin, as highlighted in a recent research report. The report emphasizes that the key metric for evaluating the Lightning Network's true value is its maximum transaction capacity, known as max flow. This metric indicates that as Bitcoin's price increases, the Lightning Network's value scales accordingly. Jesse Shrader, CEO and co-founder of Amboss Technologies, explained that the network is currently optimized for micropayments, but as Bitcoin's price rises, the infrastructure scales to handle larger payments with high performance, making them act like micropayments. Shrader likened this to the transition from dial-up internet to broadband due to Bitcoin's price appreciation. The report from Amboss Technologies, which builds Lightning Network infrastructure, suggests that traditional metrics like node and channel count are insufficient for measuring the network's scalability. Instead, max flow provides a better assessment of payment reliability and the network's overall performance. By measuring the success probability of transactions, max flow helps identify liquidity distribution and potential bottlenecks, ultimately enhancing the network's efficiency. The growing capacity of the Lightning Network, as indicated by the max flow metric, could attract more institutional participation. Shrader noted that as channel capacity increases and liquidity is better distributed, institutions may find the Lightning Network more appealing for onchain transactions. This increased capacity could lead to reduced costs and easier transactions for institutions, as larger payments can be routed with lower fees and fewer onchain transactions. According to DefiLlama data, the Lightning Network currently holds over $346 million in total value locked, making it the third-largest protocol built on the Bitcoin network.