Move Over, Ethereum – Bitcoin’s Lightning Network Has Apps, Too

Bitcoin’s dominant scaling system continues to grow despite a formidable bear market.

AccessTimeIconAug 7, 2022 at 2:50 p.m. UTC
Updated May 11, 2023 at 6:47 p.m. UTC
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While market analysts have been panicking about crypto winter, Bitcoin developers have been quietly building more apps. According to a report by Arcane Research, the Lightning Network in particular has developed a diverse ecosystem of over 100 apps across at least 20 categories.

Lightning strikes

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  • Earlier this year, Lightning’s user base shot through the roof when Block (SQ) integrated Lightning into its popular Cash App, which has over 70 million users. Just a few months before that, in September 2021, Bitcoin marketplace Paxful had integrated Lightning into its wallet and El Salvador’s government had launched the Lighting-compatible Chivo bitcoin (BTC) wallet. Paxful has a user base of roughly 7 million and Chivo is used by 3 million to 4 million Salvadorans (although Chivo usage has noticeably dropped since the wallet’s launch).

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    Arcane Research suggests these three events catapulted the Lightning user base from a modest 100,000 users to over 80 million potential users in a matter of months. It’s important to note that many of these potential users only have access to Lightning but don’t necessarily use it. Nevertheless, payment volume subsequently increased by 410% between the first quarter of 2021 and the first quarter of 2022.

    A graph showing the number of users with access to Lightning payments between August 2021 and March 2022. (Arcane Research)
    A graph showing the number of users with access to Lightning payments between August 2021 and March 2022. (Arcane Research)

    As of this writing, the Lightning Network’s capacity – the total amount of bitcoin in the network – has reached an all-time high of 4,351 BTC, equivalent to almost $100 million. The list of exchanges that have integrated Lightning is steadily growing, with Kraken, Okcoin and OKEx being the most recent additions. According to Bitcoin Visuals, the number of nodes at the end of July 2021 was around 13,391. That figure has increased by roughly 27% to almost 17,000 nodes. (The actual node count will always be higher as there is a significant number of private nodes that are not included in public data.) These increases in capacity, exchange integration and node count all point toward increased user adoption.

    Battle of the layers

    A recent tweet sparked a conversation about the number of apps being developed on top of Bitcoin and Lightning and how that compares with developer work on other chains.

    How does Bitcoin compare with Ethereum and how does Lightning compare with Ethereum’s largest layer 2 scaling system Polygon? A previous CoinDesk article analyzed numbers from venture firm Electric Capital’s 2021 developer report. The report estimates that Bitcoin has less than 700 monthly active developers while Ethereum has over 4,000. This is a huge difference, especially considering Bitcoin currently has a market capitalization of around $440 billion while Ethereum’s market capitalization sits at about $196 billion. The difference in public ownership of the two cryptocurrencies is even greater. Crypto.com, a popular cryptocurrency exchange, puts the number of bitcoin owners at approximately 176 million and the number of ether (ETH) owners at roughly 23 million.

    Similar disparities can be seen at the layer 2 level. Polygon claims to have 8,000 monthly active developer teams and 19,000 decentralized applications (dapps) running on its mainnet and testnet (Polygon’s live and testing environments, respectively). These numbers dwarf the 100 or so apps in the Lightning ecosystem.

    Based on these metrics, one might erroneously conclude that Ethereum and Polygon are healthier ecosystems than Bitcoin and Lightning. However, a closer look reveals that a direct comparison may not be possible.

    First, the Bitcoin blockchain was designed to make bitcoin (the cryptocurrency) its primary product. In fact, the Bitcoin and Lightning ecosystems are almost exclusively focused on money and payments. Ethereum, on the other hand, was primarily designed to facilitate dapp creation. Therefore, it only makes sense to have more developers building apps on Ethereum than on Bitcoin.

    Second, both Ethereum and Polygon are token-focused platforms. Initial coin offerings (ICO), decentralized finance (DeFi) and non-fungible tokens (NFT) are all products of the token economy.

    Arcane Research suggests that token economies tend to attract more investors and developers. However, Arcane also highlighted the recent increase in Lightning-focused funding. It will be interesting to see whether investor capital shifts towards Bitcoin and Lightning given the recent implosion of prominent DeFi platforms.

    100 flashes of Lightning

    Arcane Research created an infographic showing a vast collection of apps that have been built in the Lightning ecosystem.

    An infographic showing over 100 Lightning applications across multiple categories (Arcane Research)
    An infographic showing over 100 Lightning applications across multiple categories (Arcane Research)

    Here are some highlights from that collection:

    Lightning-enabled bitcoin wallets

    Phoenix is a self-custody Lightning-enabled bitcoin wallet available to both Android and iOS users. ACINQ, the company behind Phoenix, is a French Bitcoin scaling firm that has been around since 2014. The company also created the popular Eclair Mobile wallet, which is one of the first mobile Lightning wallets ever developed. ACINQ has since discontinued Eclair Mobile and recommends Phoenix as a replacement.

    Other notable wallets include BlueWallet, Breez and Electrum.

    Node management software

    Terminal helps Lightning node operators manage their nodes. Lightning infrastructure firm Lightning Labs, creators of Terminal, recently unveiled Autoloop – an enhancement that automates Terminal’s liquidity management functionality. Liquidity on the Lightning Network refers to how easily bitcoin moves between network participants. To maximize liquidity, node operators will optimize their nodes differently based on each operator’s primary use case (e.g., sending vs. receiving payments). Autoloop automates this optimization process.

    Node-as-a-Service

    Voltage, Greenlight and Bitnoder provide managed node operations. If a person or company wants to run a Bitcoin or Lightning node (or both), they can simply outsource that entire function to one of these firms for a fee.

    Blockdaemon also provides node-as-a-service solutions but is not Bitcoin-exclusive.

    Podcasts and streaming

    Fountain and Lightning.video pay content creators for their work. Fountain is a Lightning-powered podcasting platform that pays both hosts and listeners for performing value-adding activities. Hosts get rewarded by listeners for creating quality podcasts while listeners get paid by hosts for listening to and sharing podcast episodes.

    Lightning.video, for example, allows users to create video content behind “micro paywalls” – restricted access that can be unlocked by micropayments as low as a few satoshis (one satoshi = one hundred millionth of a bitcoin).

    Gaming

    THNDR Games is a mobile app that offers bitcoin rewards to gamers. The app is available on both Android and iOS and features four games:

    • Bitcoin Bay
    • Bitcoin Bounce
    • Turbo 84
    • Bitcoin Snake

    Desiree Dickerson, CEO of THNDR Games, describes her mission as “gamifying the world with bitcoin.”

    Newcomers: Lightning-enabled browser extensions

    Developers are adding new apps to the Lightning ecosystem regularly. For instance, Alby is a recently launched browser extension that enables in-browser Lightning payments. It’s like Bitcoin’s version of MetaMask – a widely used, browser-based Ethereum wallet.

    Disclosure

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    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Frederick  Munawa

    Frederick Munawa was a Technology Reporter for Coindesk. He covered blockchain protocols with a specific focus on bitcoin and bitcoin-adjacent networks.


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