Lightning Network value directly correlated to Bitcoin price: Report

The Lightning Network’s value is directly correlated with the Bitcoin price, according to a recent research report.

The report argues that max flow, which measures the network’s maximum transaction capacity, is the key metric for assessing the true value of the leading Bitcoin layer-2 (L2) Lightning Network.

This means that the Lightning Network’s value is directly scaling along with Bitcoin BTCUSD price appreciation, according to Jesse Shrader, the CEO and co-founder of Amboss Technologies.

Shrader told Cointelegraph:

“The Lightning Network is currently optimized for micropayments, but as the Bitcoin price appreciates, the payments infrastructure scales alongside the price. Larger dollar payments start to act like micropayments with high performance compared to the increasingly valuable Lightning channels.”

“It’s like your dial-up internet became broadband because the Bitcoin price went up,” he added.

Assessing max flow will become key for measuring the Lightning Network’s increasing value, since traditional metrics like node and channel count are incomplete measures for the Bitcoin scalability layer, according to a research report shared by Amboss Technologies, a firm building Lightning Network infrastructure.

Max flow: Understanding the Lightning Network’s key metric

Max flow can help assess the network’s payment reliability, showing how a transaction’s success probability changes with different payment sizes.

This is because node count doesn’t accurately measure how efficiently Bitcoin payments flow through the Lightning Network, which makes the L2 so valuable.

By measuring the success probability of a transaction, max flow helps assess the distribution of liquidity and identify potential bottlenecks, which can ultimately improve the network’s overall performance. The report said:

The Lightning Network’s growing capacity could invite more institutional flows onchain

Institutional crypto adoption will require a more reliable and scalable blockchain payment infrastructure.

More institutions may start flocking to the Lightning Network, thanks to the network’s growing channel capacity illustrated by the max flow metric. Shrader explained:

The Lightning Network’s growing max flow could lead to reduced costs and easier transactions for institutions. He added:

According to DefiLlama data, the Lightning Network is worth over $346 million in terms of total value locked, making it the third-largest protocol built on the Bitcoin network.