The Lightning Network: Turning Bitcoin into money

The Lightning Network (LN) is a means of netting Bitcoin payments outside the blockchain. We find a significant association between LN adoption and reduced blockchain congestion, suggesting that the LN has helped improve the efficiency of Bitcoin as a means of payment. This improvement cannot be explained by other factors, such as changes in demand or the adoption of SegWit. We find mixed evidence on whether increased centralization in the Lightning Network has improved its efficiency. Our findings have implications for the future of cryptocurrencies as a means of payment and their environmental footprint.

Automated summary

The Lightning Network allows for Bitcoin payments to be made off the blockchain, resulting in reduced congestion and increased efficiency. Our study reveals that this improvement cannot be accounted for by other factors and the impact of centralization on efficiency remains inconclusive. These findings have implications for the future of cryptocurrencies as a payment method and their environmental impact.