Mass adoption of the Lightning Network: how the technology took over the market
Lightning Network (LN) is a second-layer solution for scaling the Bitcoin blockchain. It functions as a network of payment channels through which transactions are conducted.
How major players embraced the Lightning Network
The years 2023 to 2025 were pivotal for the adoption of the technology behind Bitcoin's scaling solution — the Lightning Network. One of the key milestones in the project's evolution was the integration of LN with major platforms, including Kraken, Coinbase, and the world's largest custodian, BitGo.
Before these developments, despite LN's growing popularity, experts were skeptical about its future. This skepticism stemmed from the difficulty of tracking transactions within the Lightning Network. While this enhanced the privacy of Bitcoin operations, it made tracing asset movements extremely challenging. As a result, many major exchanges, including Binance and Kraken, temporarily suspended support for LN before 2023.
However, this did not hinder the network's rapid growth. Between 2021 and 2023, the Lightning Network expanded by over 1,200%, including increases in both capacity and the number of channels.
The Lightning Network reached its peak performance metrics in October 2024, coinciding with a general cryptocurrency market rally. At that time, LN had 16,000 active nodes and about 40,000 payment channels. In the same month, the network's capacity reached a record 5,000 BTC, equivalent to roughly $350 million at a Bitcoin price of $70,000.
The Lightning Network enables micropayments with extremely low fees, as little as 1 satoshi (less than one cent). This is why global retail giants such as Shopify, McDonald's, Subway, KFC, and Starbucks have chosen the Lightning Network to pilot payment systems in their retail locations.
LN is also used in Chivo, El Salvador's official government Bitcoin wallet. In the fall of 2021, El Salvador became the first country in the world to legalize Bitcoin as a form of payment. According to developers, using LN saves up to $400 million annually in transaction fees.
In Africa, the well-known platform Paxful has launched a Lightning Network-based service that enables offline transactions, marking a new phase in the development of LN. The number of active users of the platform in Africa surged, surpassing 1.5 million.
Lightning Network has also been integrated into popular social platforms like Twitter (X) and Substack, enabling users to send donations and tips to their favorite content creators.
As of July 2025, data from DeFi Llama shows that the total value locked (TVL) in Lightning Network DeFi protocols exceeds $453 million, placing LN among the top five DeFi protocols in the Bitcoin ecosystem. Since the start of 2024, Lightning Network's TVL has more than doubled.
Challenges facing the Lightning Network
Despite its substantial progress, the Lightning Network faces several challenges that hinder its ecosystem's growth amid rising competition in the decentralized finance (DeFi) space.
For example, setting up payment channels can be technically challenging for beginners, despite Lightning wallets being user-friendly. Furthermore, payment channels often suffer from liquidity shortages, limiting their functionality.
Additionally, the Lightning Network is relatively centralized and vulnerable to fraudulent attacks. A small number of companies and private investors control a significant portion of LN's liquidity.
Another issue hindering LN's growth in the DeFi segment is the limited functionality of its smart contracts. The solution does not support the creation of complex autonomous contracts or decentralized applications (DApps). This weakens LN's position compared to rapidly growing competitors, such as Ethereum, Solana, and Tron, as well as newer Bitcoin scaling solutions like Alpen and Citrea.
These challenges contributed to a decline in the Lightning Network's popularity in 2025. Since the beginning of the year, LN's TVL has dropped by nearly 15%, from $531 million to $453 million.
Despite this, experts predict continued growth for the Lightning Network shortly. Analysts also note that integrating LN with other blockchain networks and payment systems could support the project's long-term expansion.