In the dynamic landscape of digital finance, the convergence of cryptocurrency and lightning-fast transaction networks has ushered in a new era of financial efficiency and accessibility. The advent of blockchain technology promised a decentralized future, but it is the Lightning Network that stands at the forefront of this revolution, offering a solution to one of the most pressing challenges in the world of digital currencies: scalability. As traditional payment systems grapple with issues of speed and cost, the Lightning Network emerges as a beacon of hope, enabling near-instantaneous, low-cost transactions on a global scale.
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Data for today’s episode is provided by Javelin Strategy & Research’s Report: The Limits of Crypto and the Rise of Layer 2s
Growth of Lightning Network Transaction Volume in USD (millions)
- July 2018 – 0.17
- July 2019 – 9.75
- July 2020 – 8.8
- July 2021 – 55.26
Source: BitcoinVisuals
For more recent data, see the Javelin Strategy & Research’s Report: The Limits of Crypto and the Rise of Layer 2s
About Report
Truly decentralized blockchains attract participation that provides worldwide transparency and reinforces why they were developed in the first place. But blockchain networks also have a problem: As the number of network users increases, so do network congestion and transaction costs. This is where Layer 2 protocols come in.
In their simplest forms, Layer 2s leave transaction execution and activities on the base layer blockchain while handling most other activities off the chain. This, in turn, eases congestion and lowers costs. This Javelin Strategy & Research report delves into Layer 2s, the blockchain issues they can alleviate, and the challenges associated with implementing them.