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The Metric That Matters for the Lightning Network

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1 month ago

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The Lightning Network is a revolutionary scaling solution for Bitcoin, enabling fast and inexpensive payments that make everyday transactions with Bitcoin possible. As the network grows, it’s essential to measure its health and efficiency accurately, so we can unlock its full potential.

Traditional metrics like node count, channel count, and capacity have been used to assess the Lightning Network, but they only tell part of the story. To truly understand the performance of this second-layer solution, we need to focus on flow—specifically, Max Flow, a metric with a long history of optimizing complex systems.

Max Flow: The Key to Understanding Lightning’s Health

Max Flow is a powerful metric that calculates how much value can theoretically flow through a network, considering constraints like channel capacity and liquidity. It’s an essential tool for evaluating network effectiveness and reliability, particularly in systems where smooth, uninterrupted flow is the key to success.

Max Flow has been used for decades in industries ranging from telecommunications to logistics. It’s already been applied to solve problems in:

  • Telecom Networks: Max Flow helps allocate bandwidth efficiently, ensuring that data flows seamlessly across the internet.
  • Supply Chains: Companies use Max Flow algorithms to optimize the movement of goods across their global distribution networks, reducing delays and maximizing efficiency.
  • Transportation Systems: Cities apply Max Flow to traffic management, ensuring that vehicles move smoothly across road networks by optimizing flow through intersections.

These examples showcase how Max Flow improves efficiency in complex systems where resources need to move quickly and efficiently. Now, it’s being applied to the Lightning Network as seen in new data science research from René Pickhardt about feasible lightning payments. Applying Max Flow to the Lightning Network will help ensure that Bitcoin can flow smoothly between users, even as the network scales.

Max Flow isn’t about measuring the actual movement of value, but rather about understanding the probability of feasible payments across the network. By focusing on Max Flow, we gain a more accurate understanding of the Lightning Network’s true health. Instead of just counting channels or capacity, Max Flow shows us the likelihood of payment success, allowing node operators to optimize their liquidity and improve the overall performance of the network.

Max Flow provides a curve of Payment Reliability by Payment Amount, showing how success probability changes with different payment sizes for the network and specific nodes of interest.

Traditional Metrics Fall Short

Metrics like node count, channel count, and capacity provide a snapshot of the Lightning Network’s infrastructure. But much like counting the number of roads or intersections in a city, these numbers don’t tell us how well traffic is flowing. In the case of the Lightning Network, what really matters is how efficiently Bitcoin can be routed through the system.

Critics who focus solely on these traditional metrics often draw limited conclusions about the network’s performance. While it’s important to know the size of the infrastructure, it’s far more valuable to understand the probability of successful payments.

Max Flow offers that deeper insight. By measuring the success probability of payments, it helps us see where liquidity is well-distributed and where bottlenecks might be forming. This enables operators to make data-driven decisions that improve the network’s performance and ensure that payments are routed reliably.

Max Flow Shows Lightning’s Performance Rises with Bitcoin Price

The Lightning Network is designed to scale with Bitcoin, offering fast and cheap transactions without overloading the Bitcoin blockchain. As Bitcoin’s price appreciates, the network’s capacity to handle larger payments grows naturally.

For example, if a channel holds 0.1 BTC and Bitcoin is priced at $50,000, that channel can route a $5,000 payment. If Bitcoin’s price doubles to $100,000, that same channel can handle $10,000—without any changes to the underlying infrastructure. As the bitcoin digital economy grows, so too will the capabilities of the Lightning Network. Bitcoin price increases coupled with data-driven changes to the Lightning Network will help expand the capabilities of Lightning.

Max Flow plays a critical role here, helping to measure the success probability of payments as the network scales. It provides an essential tool for monitoring payment reliability and ensuring that the network remains efficient as demand for Bitcoin transactions grows.

The network payment reliability increases as bitcoin’s price appreciates from $50,000 to $100,000 assuming no changes to the Lightning Network.

Max Flow is the Future of Lightning Monitoring

Max Flow is the next-generation metric that will help drive the Lightning Network forward. By moving beyond superficial statistics like capacity or node count, it offers node operators and investors a more accurate picture of the network’s performance. This, in turn, helps them make smarter decisions about liquidity allocation and payment routing.

For investors, Max Flow offers a more reliable measure of network health, revealing the underlying potential of the Lightning Network. Those who focus on Max Flow will gain deeper insights into the scalability and efficiency of Lightning, positioning themselves to capitalize on future growth.

For node operators, understanding Max Flow means being able to optimize their channels for better performance. It helps them manage liquidity more effectively, ensuring that payments flow reliably, and improving the user experience for those interacting with the network.

Conclusion: Max Flow is the Metric That Matters

As the Lightning Network evolves, Max Flow will be essential to its health and performance. While traditional metrics like node count and channel capacity offer a limited view of the network, Max Flow reveals how efficiently value can move through the system—a critical insight as Bitcoin grows and the demand for reliable payments increases.

Max Flow is more than just a new way to measure the network—it’s the key to unlocking the Lightning Network’s full potential. By focusing on the metrics that matter, node operators and investors can help the network scale smarter, ensuring that Bitcoin’s role in the global economy continues to expand.

TL;DR

  1. Traditional metrics like node count, channel count, and capacity don’t provide a full picture of the Lightning Network’s performance.
  2. Max Flow is the right metric to assess network health, as it evaluates the probability of feasible payments and liquidity optimization.
  3. As Bitcoin’s price appreciates, the Lightning Network’s capacity to handle larger payments grows naturally, and Max Flow helps monitor this process.
  4. Max Flow has proven its value in optimizing complex networks in industries like telecommunications, supply chains, and transportation.
  5. Max Flow will play a critical role in helping the Lightning Network scale efficiently, making it an essential tool for both investors and node operators.

This is a guest post by Jesse Shrader. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

About Amboss:

Amboss is building the infrastructure for the Bitcoin Lightning Network, enabling seamless, real-time transactions across industries. With machine-learning-powered routing and liquidity optimization, Amboss ensures billions of low-cost payments happen securely and efficiently. As AI-driven economies emerge, Amboss provides the backbone for autonomous systems to transact at scale.



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Markets

The Chart That Shows Bitcoin’s Bull Run Won’t Stop at $100,000

Published

2 hours ago

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November 21, 2024

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Peak Bitcoin, hardly.

Follow Rizzo on X.

https://x.com/pete_rizzo_/

As I wrote in Forbes in 2021, the world is waking up to a new reality in regards to Bitcoin – the unlikely truth that Bitcoin’s programming has cyclical effects on its economy.

This has led to at least 4 distinct market cycles where Bitcoin has been branded a bubble, skeptics have rung their hands, and each time, Bitcoin recovers more or less 4 years later to set new all-time highs above its previously “sky-high” valuation.

I personally watched Bitcoin go from $50 to $1,300 in 2013. Then, from $1,000 to $20,000 in 2017, and I watched it go from $20,000 to $70,000 in 2021.

So, I’m just here to relate that, from my past experience, this market cycle is just heating up.

For those who have been in Bitcoin, there’s one tried-and-true and that’s Google Search. As long as I’ve been in Bitcoin, this has been the best indicator of the strength of the market.

Search is low, you’re probably in a bear market. Search heading back to all-time highs? This means new entrants are getting engaged, learning about Bitcoin, and becoming active buyers.

Remember, this is a habit change. Bitcoin HODLers are slowing shifting their assets to a wholly new economy. So, Google Trends search then, represents a snapshot of Bitcoin’s immigration. It shows how many new sovereign citizens are moving their money here.

And it’s something that all who are worried about whether bitcoin’s price topping out in 2024 should pay attention to.

Last year was the Bitcoin halving, and historically, the year following previous halvings has led to price appreciation. Maybe you’re tempted to think, “this time is different” – not me. I look at search and I see a chart that continues to accelerate into price discovery. Trust me when I say no one I know is selling bitcoin.

As shown above, buyer interest is accelerating, and these new buyers have to buy that Bitcoin from somewhere. Add nation states, US states, and a coming Trump administration set to ease the burden on the industry?

Well, I think the chart above says it all really. 

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.



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Bitcoin Onboarding

JIPPI IS POKÉMON GO FOR BITCOIN

Published

18 hours ago

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November 21, 2024

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Today’s modern Bitcoin exchanges have drastically improved access to Bitcoin ownership in 2024. Gone are the days of janky peer-to-peer (P2P) trade forums and questionably secure early exchanges like Mt Gox. Instead, a legion of Bitcoin on-ramps focused on superior security and user experience (UX) has made purchasing your first Bitcoin a breeze. Many of these services have even embarked on education-focused initiatives to encourage greater adoption during Bitcoin’s most recent bear market. In November 2023 Swan launched Welcome to Bitcoin, their free introductory 1 hour course about Bitcoin. In December 2023, Cash App released BREAD, a free, limited-edition magazine that uses design to tell stories and educate readers about Bitcoin in a relatable and accessible way.

What these initiatives show is that Bitcoin adoption is approaching a turning point. These two major Bitcoin exchanges, along with the industry as a whole, are discovering that easy access to a smash buy button does not guarantee purchase. Numerous barriers to entry still exist for nocoiners, which provide significant constraints to understanding Bitcoin, and thus throttle Bitcoin’s growth and adoption. As we approach a steeper incline in Bitcoin’s bell curve, throwing novices into exchange apps without sufficient education and cultivation is no longer a strategy for success.

@Vivek4real_

What once was a far simpler task of energizing early adopters and cypherpunks around Bitcoin’s clear value proposition, is evolving into a more complex and convoluted process of orange-pilling the early majority of future Bitcoin holders. This, we hope, will then lead to widespread Bitcoin mass adoption as society en masse chooses to store its time and energy in the best money ever created. For this hyperbitcoinization to occur, more people need to understand the intricacies of Bitcoin. This is easier said than done because Bitcoin still has an education problem:

  • A YouGov survey found that 98% of novices don’t understand basic Bitcoin concepts.
  • A nationwide survey from the Yale Center discovered that 69% of young people find learning boring.

This research outlines the struggle of onboarding and educating the next generation of Bitcoiners, most notably younger generations who have been shown to possess a limited attention span of 8 seconds. For inspiration to help solve this problem, we can look at one of the most popular mobile games of all time… Pokémon GO.

pokemongolive.com

Pokémon GO was and remains to be, a global phenomenon. This beloved app caught the attention of Gen-Z, millennials, and Gen-X alike, boasting record-breaking engagement stats:

We at Jippi believe that the success of this award-winning game can illuminate the path forward for Bitcoin adoption. So we have set upon the electrifying task of building Tribe Clash–the world’s first Pokémon GO-inspired Bitcoin education game. The rules are simple, create or join a Tribe and battle for dominance over a city with your friends by catching a Bitcoin-themed Beast in every Territory.

Each week Jippi will release a new Territory to be claimed. A Tribe member will explore that Territory with their phone, where they will discover a Bitcoin Beast to catch. If they successfully answer all Bitcoin quiz questions correctly the fastest, they will then catch that beast. The Tribe with the most Territories and Bitcoin Beasts at the end of the game will win $30k worth of Bitcoin to be dispersed equally to each Tribe member.

Our vision is for Jippi to become the largest, most popular platform for beginners to gather, educate, and accumulate Bitcoin. We see Jippi as the most accessible on-ramp into the industry, where we can educate a whole new generation of Bitcoiners from novices to experts by lowering the barrier to entry.

You can support the development of Tribe Clash by contributing to our crowdfunding campaign on Timestamp. Timestamp enables investors of all backgrounds to support Bitcoin-only companies and make an impact. Our campaign is open to both the general public and accredited investors, so we would love for you to join us on this journey.

This is a guest post by Oliver Porter. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.



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Bitcoin

Bitcoin Boosts MicroStrategy (MSTR) to Higher Trading Volume Than Tesla and Nvidia

Published

22 hours ago

on

November 20, 2024

By


Follow Nikolaus On X Here

Today, MicroStrategy (MSTR) surpassed a $100 billion market cap to become the 93rd largest publicly-traded company in the U.S.

At the time of writing, MSTR has done more trading volume than both stock giants Tesla and Nvidia today, and has traditional stock traders like the Wall Street Bets community losing their minds.

 This is absolutely mindblowing considering MicroStrategy was a mere $1 billion company when it first bought bitcoin for its treasury about four and a half years ago.

MicroStrategy’s market cap from when they first bought Bitcoin to now

The big question I’m asking myself is, how and when does this end? Assuming MSTR continues to pump until the peak of this bull market, it’s anyone’s guess on how high MSTR may go.

But how hard will it crash in the bear market, considering it is essentially a leveraged trade on bitcoin? Dare I even suggest that this time may be different, and that the downside of the next bitcoin bear market won’t be as brutal as the 70%+ corrections we’re historically used to seeing?

Even with the spot bitcoin ETFs, and the notion that the US may lead the charge of nation states buying up mass amounts of bitcoin, I’m still not convinced that we don’t eventually see a massive downturn in bitcoin’s price. And I’m mentally preparing for a normal bitcoin bear market to commence after this bull market finishes sometime in the next year or so.

But back to MSTR — Michael Saylor has thus far proven that the Bitcoin for Corporations strategy works in stunning fashion. Public companies have been coming out of the woodwork this past week announcing that they’ve purchased bitcoin for their balance sheet or plan to do so, and it seems this trend will continue as the CEO of Rumble asked his X audience if he should add BTC to their balance sheet (almost 94% of his 42,522 voters voted “yes”).

 Michael Saylor even offered to help explain how and why Rumble should adopt a corporate BTC strategy.

Institutional bitcoin adoption is here and it’s only going to grow for the foreseeable future. As companies figure out the logic behind adopting bitcoin as a strategic reserve asset, the number of publicly-traded companies that adopt this strategy is going to explode.

Companies that add bitcoin to their balance sheet will rise above most other companies — even top big tech giants — in terms of trading volume, as MicroStrategy has, until all companies add bitcoin to their balance sheet. I try to put myself in the shoes of a trader, with knowledge on Bitcoin and think to myself, “Why on earth would I buy any company’s stock if they don’t have bitcoin on their balance sheet?” I wouldn’t — it would be way too boring.

Putting BTC on the balance sheet helps create volatility, and therefore opportunity for stock traders, which is good for the traders, stock price, and company overall. If you are a publicly-traded company, it is a no brainer to adopt bitcoin as a treasury reserve asset.

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.





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