New data from Glassnode has revealed that Bitcoin’s Lightning Network is significantly cheaper to use than traditional payment networks. According to the data, the median fee rate for sending value across the Lightning Network is 0.0029%, which is 1,000 times cheaper than that of Mastercard or Visa payment processors. This fee rate translates to 3,000 Satoshis, or $0.84 to send $28,800 worth of value, which is a fee of 0.0029%. This rate is significantly less than that charged by major credit card companies, making the Lightning Network a fast and low-cost solution for businesses and individuals.
The Lightning Network is a layer-2 payments solution built atop the world’s largest cryptocurrency, which was first proposed as a way to make Bitcoin effective as a payment method. The mean fee rate has been steadily trending lower since November 2021, demonstrating that it is not only fast but also cost-effective. In contrast, legacy payment networks such as Visa and Mastercard charge merchants a fee of around 2-3% per transaction, making them an expensive option for businesses. In fact, in an upcoming Cointelegraph documentary shot in Cape Verde, the business owner of one of the few businesses to accept Bitcoin explained that accepting foreign Visa and Mastercard costs over 8%.
However, the throughput of the Lightning Network could be called into question. James Check, lead analyst at Glassnode, explained that the typical channel size is smaller than 1 BTC, with the median channel size being 0.02 BTC and the mean being 0.08 BTC. As a result, the Lightning Network remains well suited to payments below $1,000. In an environment where the channel size is trending higher but still well under $10,000, payments over $1,000 may be better suited to the Bitcoin base chain in order to avoid payment failure or misfire.
Many Lightning users take advantage of custodial wallets, such as Wallet of Satoshi and Alby, to make micropayments on social media apps such as Nostr. While some Bitcoin early adopters have noted the growing preference for custodial solutions, semi-custodial solutions such as Fedi and Cashu could undermine reliance on fully custodial solutions. Overall, the Lightning Network’s low fees and fast transaction times make it an attractive option for businesses and individuals looking for a cost-effective payment solution.