The Lightning Network’s value is directly correlated with the Bitcoin price, according to a recent research report.
The report argues that max flow, which measures the network’s maximum transaction capacity, is the key metric for assessing the true value of the leading Bitcoin layer-2 (L2) Lightning Network.
This means that the Lightning Network’s value is directly scaling along with Bitcoin (BTC) price appreciation, according to Jesse Shrader, the CEO and co-founder of Amboss Technologies.
Shrader told Cointelegraph:
“The Lightning Network is currently optimized for micropayments, but as the Bitcoin price appreciates, the payments infrastructure scales alongside the price. Larger dollar payments start to act like micropayments with high performance compared to the increasingly valuable Lightning channels.”
“It’s like your dial-up internet became broadband because the Bitcoin price went up,” he added.
Max flow, payment reliability by amount. Source: Amboss Technologies
Assessing max flow will become key for measuring the Lightning Network’s increasing value, since traditional metrics like node and channel count are incomplete measures for the Bitcoin scalability layer, according to a research report shared by Amboss Technologies, a firm building Lightning Network infrastructure.
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Max flow: Understanding the Lightning Network’s key metric
Max flow can help assess the network’s payment reliability, showing how a transaction’s success probability changes with different payment sizes.
This is because node count doesn’t accurately measure how efficiently Bitcoin payments flow through the Lightning Network, which makes the L2 so valuable.
Lightning Network payment success vs. price. Source: Amboss Technologies
By measuring the success probability of a transaction, max flow helps assess the distribution of liquidity and identify potential bottlenecks, which can ultimately improve the network’s overall performance. The report said:
“For example, if a channel holds 0.1 BTC and Bitcoin is priced at $50,000, that channel can route a $5,000 payment. If Bitcoin’s price doubles to $100,000, that same channel can handle $10,000—without any changes to the underlying infrastructure.”
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The Lightning Network’s growing capacity could invite more institutional flows onchain
Institutional crypto adoption will require a more reliable and scalable blockchain payment infrastructure.
More institutions may start flocking to the Lightning Network, thanks to the network’s growing channel capacity illustrated by the max flow metric. Shrader explained:
“As channel capacity grows and liquidity becomes better distributed across the network, we could see more institutional flows tapping into the Lightning Network.”
The Lightning Network’s growing max flow could lead to reduced costs and easier transactions for institutions. He added:
“Increased channel capacity also means that institutions can route larger payments with lower fees and without requiring frequent onchain transactions. This reduces costs and friction, potentially leading to more institutional activity offchain, as institutions use Lightning for settlement purposes.”
Lightning Network, total value locked, all-time chart. Source: DefiLlama.
According to DefiLlama data, the Lightning Network is worth over $346 million in terms of total value locked, making it the third-largest protocol built on the Bitcoin network.
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