The cost of using Bitcoin’s Lightning Network is notably lower compared to traditional payment networks like Mastercard and Visa, data from analytics platform, Glassnode, has revealed.
According to Glassnode, the median fee rate, or the cost of sending value across the Lightning Network, is 0.0029% – 1,000 times cheaper than that of Mastercard or Visa payment processors.
James Check, a lead analyst at Glassnode says that the median fee rate, or the fee charged per 1 BTC sent across the Lightning Network, is currently 3,000 satoshis, which is ‘equivalent to $0.84 to send $28,800 worth of value […,] which comes down to a fee of 0.0029%.’
The Lightning Network is a layer-2 payments solution built atop the world’s largest cryptocurrency, Bitcoin, and was first proposed as a way to make Bitcoin effective as a payment method. These data points demonstrate that it is not only fast but low-cost with the mean fee rate steadily trending lower since November 2021.
Businesses incur a high cost when using traditional payment networks like Visa and Mastercard as these processors typically charge merchants a transaction fee of approximately 2-3%.
The Lightning Network uses channels between participants so that multiple transactions can be handled without waiting for the slower main net to confirm single exchanges. Between the opening and closing of a channel, parties can shift funds between themselves as needed until they close the channel.
Glassnode’s data is based on users who manage their own channels and run their own nodes. Numerous Lightning users prefer using custodial wallets like Wallet of Satoshi and Alby to conduct micro-payments on social media platforms like Nostr.
The graph below indicates a rising trend in channel size, although it remains relatively low at less than $10,000. Given this context, it may be more appropriate to process payments exceeding $1,000 on the Bitcoin base chain in order to prevent payment failures or errors.
“Of course, we must also consider that the typical channel is smaller than 1 BTC. The median channel size is 0.02 BTC and the mean is 0.08 BTC, so overall, the Lightning Network remains well suited to payments below $1,000.” – Check