Lightning Network: 5% of Stablecoin Market by 2028?
Bitcoin’s Lightning Network (LN), a layer-2 scaling solution, is poised for significant growth in stablecoin transactions. Industry experts foresee increased adoption by both retail users and institutions, potentially leading to substantial volume increases over the next few years.
Lightning Network's Potential Stablecoin Market Share
Graham Krizek, founder and CEO of Voltage, a Lightning Network payments provider, projects that the network could handle at least 5% of the global stablecoin volume by 2028. He shared his insights with Cointelegraph, emphasizing the scalability benefits the Lightning Network offers.
"Five percent [or more] of stablecoin volumes [will be] on Lightning Network at minimum in three years."
With current daily stablecoin volumes around $180 billion, according to CoinGecko, this projection equates to approximately $9 billion potentially traded on LN. This figure is expected to rise as stablecoin regulations, such as the GENIUS Act in the United States, become more widespread.
Krizek highlighted that stablecoins will drive adoption, stating, "Lightning is the top scalability tool for stablecoins." He acknowledged the current low stablecoin activity on LN but anticipates significant growth in the near future.
"Stablecoins are just now starting to come to Lightning, and some of the major players like Tether or Circle are not yet live. So the current percentage [of volume] is near zero but will be growing in the second half of this year."
Tether's Entry and Lightning Labs' Innovations
Tether, the largest stablecoin issuer, integrated Tether (USDT) with native LN support in January. Lightning Labs also released Taproot Assets (v0.6) to establish the network as a decentralized forex layer for stablecoins on Bitcoin.
Tether CEO Paolo Ardoino has expressed concerns about blockchain scalability, noting that Lightning's peer-to-peer nature makes it ideal for large-scale stablecoin transactions. "The beauty of USDT on Lightning is that it is the perfect way to do high-scale transactions," he said in April.
Key Drivers of Lightning Network Adoption
Krizek identifies retail users and developers as key drivers of LN adoption.
"Edge cases are being built by developers, and retail is always using, testing and exploring ways in which Lightning is becoming a staple to these new edge cases."
Increasing demand from retail customers is pushing businesses to adopt Lightning. Growing institutional interest is also a factor, with traditional institutions recognizing the benefits of LN in managing risk, improving access to working capital, and reducing counterparty and chargeback risks.
Exchanges are adopting LN for cost savings and faster transactions. Firms like Cash App are already using it, with 25% of their BTC payments on the LN.
"Any business that uses Bitcoin will have Lightning integrations. Instant settlement will be standard, like we expect from any payment option."
Current State of the Lightning Network
The Lightning Network currently comprises 14,000 nodes, 44,800 channels, and a capacity of 3,820 BTC, valued at approximately $448 million, according to Amboss. While network capacity has decreased by 23% since the start of the year, Krizek notes that larger, more efficient channels are being established.
Access to the LN has doubled since last year, with over 700 million users via exchanges, wallets, neo-banks, and payment platforms.
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