Bitcoin's Dropping Lightning Capacity Might Not Be a Bad Thing

If you're a fan of bitcoin and the nascent Lightning network, this graph looks disheartening at first glance.

While lightning is still considered "Beta" software, and thus risky to use, bitcoiners have been so enthusiastic about it and using it anyway, for games and beyond, chanting the unofficial slogan "Reckless." As lightning's capacity increased rapidly over its first year, devotees cheered it on social media.

The catch is that, while this number is decreasing, lightning use might still actually still be increasing because of increased privacy of lightning channels and other channel optimizations.

Under the hood, there are "Advertised" channels which advertise their existence to the rest of the lightning network and "Non-advertised" channels which don't.

Some go as far as to argue that the public capacity is a "Useless indicator" because it doesn't capture all - or maybe even most - of the money in the lightning network.

"If a regular bitcoin transaction is similar to uploading your bank statement to a public web site, a lightning network transaction is similar to showing each merchant you pay how much money you have in one specific compartment of your wallet. You're still revealing some information, but much less," as lightning startup SuredBits wrote.

Another reason the capacity is decreasing is because some entities are closing down lightning channels that were wasteful.

There's one famous and mysterious anonymous lightning user by the name of LNBIG who has opened many lightning channels.

They initially initially debuted by pouring 300 bitcoin into the lightning network, giving new meaning to lightning's "Reckless" catchphrase.

LNBIG posted a Twitter poll before following through with closing these channels, arguing that the only downside would be the "Psychological effect" that lightning's capacity would fall down to 825 bitcoin.