- Daily unique transactions on the Bitcoin network have seen a significant drop.
- Despite this fall, the reduction could provide an impetus for development.
- The Lightning Network promises to solve Bitcoin’s scaling problems.
Scalability issues remain the bane of most major blockchain networks, most recently, Bitcoin. The biggest crypto has seen a drop in network usage as it continues to struggle with network congestion.
On Thursday, May 18, the number of unique addresses performing transactions daily dropped to less than 800k. This marks a 22-month low for Bitcoin, the lowest level since July 2022.
However, this drop might not necessarily signal the decline of Bitcoin’s utility. As scaling solutions increase in popularity, Bitcoin’s Network could naturally see a drop in activity.
Lightning Could Ease Bitcoin’s Congestion Issues
The drop in unique daily transactions doesn’t account for transactions via the Lightning Network, Bitcoin’s Layer-2. For some, this scaling solution holds the keys to making Bitcoin transactions faster and cheaper.
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With the growing popularity of scaling solutions, Bitcoin’s congestion issues could be relieved. This would, however, likely result in a natural decrease in the base layer’s transaction activity as more users migrate to second-layer solutions.
Still, the recent drop in transactions on the Bitcoin network has not been accompanied by a corresponding activity on the Lightning Network. This indicates that, despite its advantages, Lightning Network still has hurdles before it can reach mass adoption.
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For instance, technical challenges, such as routing issues and channel capacity constraints, have been a sticking point for some users. Furthermore, setting up a Lightning node can be daunting for non-technical users, posing another barrier to widespread adoption.
Bitcoin Struggling With Ordinals
This sudden decrease in unique transactions is likely due to the rise of ordinals. These inscriptions, Bitcoin’s answer to Non-Fungible Tokens (NFTs), are becoming increasingly popular. However, their popularity comes at a price, helping escalate the network’s gas fees.
As gas prices continue to climb, more and more users start avoiding transactions that are not necessary. This is likely the reason behind the noticeable reduction in overall network activity.
On the Flipside
- In May, Litecoin hit a record amount of transactions thanks to rising fees and congestion on the Bitcoin network.
- The Bitcoin community is not in agreement with how to deal with ordinals. In May, one core developer’s suggestion to ban ordinals started a civil war in the community.
Why This Matters
Bitcoin’s scaling issues could significantly impact the dominant crypto in the future. As the community tackles the scaling issues, it is crucial to understand how they impact the network.
Read more about how Lightning can tackle the ordinals issue:
How Lightning Network’s Taproot Upgrade Solves BRC-20 Issues
Read about the latest trends in the retail use of DeFi:
Uniswap Survey Uncovers DeFi Barriers, but Users Keen to Experiment
