While the Bitcoin Lightning Network is decentralized in theory, recent data reveals a centralizing trend. Approximately 48% of all Bitcoin Lightning Network (LN) nodes are housed in the cloud, with Amazon Web Service (AWS) catering to 29% of the network and Google Cloud hosting 19%. The advantage of central cloud services includes high uptime and reliability, critical for executing Lightning Network transactions.
The heavy reliance on AWS and Google Cloud indicates a departure from Bitcoin’s globally decentralized network of individual miners. The operation of LN nodes on such centralized platforms underlines an issue within the Lightning Network’s structure. A constant online presence is required to perform off-chain BTC transactions, drastically faster and more economical than typical on-chain exchanges. As Bitcoin-based smart contracts necessitate both parties’ online presence, many operators use services like AWS or Google Cloud as their failsafe.
In May 2023, Voltage, a Lightning as a Service (LaaS) platform, joined forces with Google Cloud to enhance scalability and enable Lightning Node establishments in multiple locations. As it stands, AWS hosts the highest number of Bitcoin LN nodes, totaling over 550. The network’s capacity has transcended $138.4 million in BTC, involving more than 15,500 individual nodes.
Nevertheless, as significant strides are being made, the adoption rate of Lightning Network stays low. More investors turn to Ethereum or the BNB Chain to enjoy higher yields via decentralized finance (DeFi). Interestingly, recent data disclosed that more Bitcoin is transferred into Ethereum than stashed in Bitcoin Lightning Network nodes.