Although Bitcoin (BTC 1.38%) Often touted as a superior form of money and a premier asset for storing wealth due to its scarcity and decentralization, it does have some shortcomings. The most glaring shortcomings are high costs and slowness in sending small transactions.
When sending these smaller transactions, it’s not uncommon for the transaction fee to be higher than the transaction itself. This has been one of the most well-known obstacles preventing bitcoin from becoming a viable option for everyday purchases like a cup of coffee or a meal at a restaurant become.
However, this could slowly change.
Bitcoin gets a little help
In 2018, developers released a solution called the Lightning Network that would help mitigate those high fees and slow speeds for smaller transactions. The specifics of how it works can be a little complex, but most importantly, the Lightning Network can increase transaction speeds from as little as 10 per second to more than 1 million per second, and costs only a fraction of a cent.
In its infancy, the Lightning Network’s growth was slow, but an explosion took place on the network by 2021, when Bitcoin surged to an all-time high of nearly $69,000 and users sought cost-effective solutions to send and receive Bitcoin.
But since that peak in 2021, the Lightning Network has remained impressively resilient and even continued to grow during the current bear market.
On February 26, the Lightning Network hit a new all-time high in network capacity. This metric measures the amount of bitcoin locked in the network and serves as a proxy to measure liquidity. The rationale is that the greater the liquidity, the greater the network’s capacity to process larger transactions faster and cheaper.
We can see this phenomenon in action if we look at the average network subscription. Despite the fluctuating price of bitcoin, there is a clear and obvious trend that the mean fee is falling over time. In late 2022, it hit an all-time low of $0.00000016. Talk about cheap.
Beginning of a new era
Considering that the Lightning Network continues to thrive even in the midst of this crypto winter, there is good reason to believe that this growth will continue should a bull market materialize. Therefore, the narrative that Bitcoin is too expensive and too slow for everyday payments is likely to unravel.
Should the Lightning Network continue on its current growth trajectory, it could result in Bitcoin truly becoming a superior form of money that can be used not only as a store of value but also as an attractive means of payment.
Although some believe it is already in the top tier of all cryptocurrencies, the combination of Bitcoin’s use case as a long-term investment and the growth of the Lightning Network could cement Bitcoin’s position as the leading digital asset for years to come. Considering Bitcoin’s price is still more than 70% below its all-time high, investing today seems almost too good to be true.
RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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