Lightning Network Snubbed: More BTC Now Held on Blockstream Liquid Sidechain

TL;DR: More BTC is being held on Blockstream’s Liquid Sidechain than the Lightning Network (LN), according to two sites tracking such information, Liquid.net and DeFi Pulse. It’s quite a snub for LN, once touted to be the answer to BTC’s notorious scaling issues, and it appears BTC maximalists have all but given up on peer-to-peer electronic cash. 

More BTC Now Held on Blockstream Liquid Sidechain Than Lightning Network

Kyle Torpey of Longhash was among the first to notice. The vaunted Lightning Network, second layer solution and part answer to the contentious Bitcoin scaling debates, and in development for half a decade, was leapfrogged this month by Liquid Sidechain, which has only been live since late 2018. At the time of writing, 925 BTC are locked in public LN channels, while 952 BTC are held in Liquid.

DeFi Pulse: BTC Locked in Lightning Network

In truth, Liquid has its roots around the same time as LN, and the genesis of both have close ties to BTC maximalist company, Blockstream, which has made its brand around opposing P2P electronic cash and is more recently partnering to become a bank. The idea for Liquid comes out of sidechain thinking, attempting to walk the tightrope of corporate capture and a permissionless, trustless Bitcoin network. Blockstream’s Liquid is a consortium of two dozen larger ecosystem companies, referred to as a federated sidechain, from exchanges such as Bitfiinex and BitMEX, to related finance companies such as Atlantic Financial, which make up a majority of BTC’s trading volume.

BTC is converted into a Liquid token (LBTC), pegged to BTC, which allows for funds to move around with far less friction than dealing with pesky on-chain transactions. Whereas Lightning Network is more peer-to-peer in its orientation through funded channels, Liquid is all about speculation and trading speed. That BTC maxis seem keen on Liquid over that of LN might be yet another sign peer-to-peer electronic cash is far less important than speculation.

Lightning Network, on the other hand, was meant to stave-off those who challenged BTC’s small-block dogma, especially as mainstream adoption was gaining steam in 2017. Users, however, were finding the network clogged and slow, and transaction fees were skyrocketing due to artificially small blocks. Blockstream was instrumental in pushing LN as well, and later investors such as Jack Dorsey helped to seed companies like Lightning Labs to great hype and fanfare. To date, LN hasn’t taken off as a P2P alternative, but efforts have yielded a recent conference and a project beset by never-ending technical problems.

Bitcoin Cash

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