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Bitcoin's revolutionary Lightning Network has seen two major rollout initiatives in the past month, with new arrivals for both the Southeast Asia region and Coinbase worldwide; However, it faces growing criticism that the entire protocol is fundamentally flawed.
The accelerator network is a layer 2 protocol being developed on the Bitcoin blockchain with the ambitious goal of trying to solve Bitcoin's scalability problem. Since the theory behind this protocol was first developed in 2016, it has received significant attention from the entire industry as a potentially revolutionary new future. Essentially, Lightning seeks to embrace the decentralized nature of Bitcoin by relying on a mesh network of locally hosted nodes to implement its key functions. BTC microtransactions are made by different users and processed through these nodes; Smart contracts enforce a system in which these small transactions are swapped and aggregated. These larger packets are then processed directly on the original blockchain, so congestion there is reduced to a minimum and it is possible to use Bitcoin for daily transactions. Since development began, major and influential figures have endorsed the project; Most famously, the government of El Salvador is using Lightning to make Bitcoin a payment option available to all of its citizens.
Despite the program's early hype, a persistent view that the project has stagnated is rising. Going back years, multiple defenses of Lightning's long-term viability as a concept also acknowledged its setbacks, claiming that the technology might not be enough of a “silver bullet” to solve the scaling problem itself. Even as the network grew to its highest levels, a series of problems remained unwavering. For example, smaller nodes may not have the practical capacity or start-up capital to actually move user funds; Errors hamper the user experience. Access for traders is somewhat non-existent; As well as other concerns.
Although these issues were well known, by April 2024, there are some signs that have community members wondering if a breaking point has been reached. A series of long-term developers have publicly left the project and denounced its flaws, and this list includes them both of them The original authors of the protocol. As Paul Szturk, Lightning developer and CEO of Layer Two Labs, said, “Everyone now acknowledges that you can't onboard 8 billion people” to Lightning, a “microscopic” amount of total Bitcoin is already available on Lightning, and, most importantly, “all of “Uses the real thing almost doesn't like it” amid a litany of complaints. In fact, a particularly alarming statistic has emerged about the future prospects of Lightning, as Bitcoin's network capacity is steadily declining even as its dollar capacity reaches all-time highs.
However, these problems did not lead the community as a whole to consider the project finished. For one thing, some long-term developers have shown continued optimism and a desire to keep building, and Bitcoin's assertive spirit has yet to leave Lightning. But more importantly, significant progress is being made in reliable market access. In March 2024, Lightning Neutronpay secured $1.5 million in venture capital bridge funding to deepen its network infrastructure and viability in Southeast Asia. Ongoing projects like this are vital to ensure that users in less developed areas remain able to access secure nodes.
However, this victory pales in comparison to the events of April 3, where Coinbase ended a secure partnership to roll out Lightning on its platform. Coinbase has expressed general support for Lightning access for several months, but only a concrete agreement with a partner like Lightspark can turn that support into access for the exchange's global user base. Coinbase is one of the largest exchanges in the world, with over $150 billion in transaction volume on a quarterly basis, so combining their vast resources with Lightspark's specific technical know-how is sure to create a solid node infrastructure. One of the biggest concerns for the network as a whole is the countless problems that faulty nodes can create, so Coinbase will definitely be a bulwark in this regard.
The whole situation for the accelerator network bears notable similarities to Ordinals, another popular Layer 2 protocol for Bitcoin. Rather than creating a platform to process Bitcoin microtransactions as regular payments, Ordinals instead seeks to convert BTC into a more sustainable micro format, such that it is not spent in regular payments. Ordinals is able to “record” unique data on individual denominations of Bitcoin, enabling the integration of popular new token assets with the leading blockchain. Of course, the project is not only used for these token assets, as engraving can be used to incorporate a large variety of information into the indelible blockchain. In a particularly memorable episode, some developers used ordinals to score discontinued video games.
This whole concept has drawn a fair share of anger from certain sectors of society. For example, influential developer Luke Dashger claimed that the entire rationale behind Ordinals is a “vulnerability” in Bitcoin, a point that is “exploited… to spam the blockchain.” Related to major congestion issues in Bitcoin, Dashjr proposed a way to “fix” this alleged vulnerability and sabotage Ordinals' ongoing operation. Even with network congestion reduced, the whole concept still faces opposition. Binance cited their “continued efforts to simplify product offerings” as the rationale for completely removing Ordinals from their platform in April.
To be sure, criticism of the Lightning differs greatly from criticism of the Ordinals. Lightning's critics call it a failed attempt to help ease Bitcoin's usability, while Ordinals' critics see its success as a threat to the same goal. However, there are a number of similarities between the two positions: both have developed cadres of vocal opponents, and both have seen recent practical setbacks to their overall capabilities. Bitcoin's blockchain developers have always been an eclectic bunch, having a wide range of very different viewpoints on how to improve Bitcoin. Especially considering that the Bitcoin world is global and leaderless, it is no surprise that these complex layer 2 protocols are stepping on just a few fingers.
However, neither of them was completely defeated. Dashjr's proposal to disable Ordinals was strongly rejected by the community, and development continues. In an impressive turnaround, trillion-dollar financial giant Franklin Templeton has endorsed Ordinals with a report from its digital assets division. This report claimed that Ordinals was leading a “renaissance” in Bitcoin adoption and that Ordinals’ new products had revitalized Bitcoin’s user base and clearly demonstrated the blockchain’s flexibility and superiority over its competitors. Such praise from such an important source can be truly groundbreaking.
Such events serve, more than anything else, to prove once again that the spirit of Bitcoin is not only about disrupting existing industries and building a more rational system on the ruins. Developers from all over the world also have a resolute ability to keep working on a project in difficult times, and this spirit has served us well on Bitcoin's difficult path to the top. Lightning developers and Ordinals have demonstrated a continued ability to improve their projects despite great adversity, and this spirit has been rewarded with new institutional acceptance. It is currently unclear where exactly either of these projects will go or whether a newer layer 2 solution will overtake them as the next revolution in Bitcoin. No matter what happens, it is clear that Bitcoin as a whole will be stronger for it.
