According to recent metrics, bitcoin ( BTC) held in the Lightning Network, a payment-oriented layer two (L2) protocol, has declined sharply over the past 37 days.
Lightning Network’s $69M Drain
The network’s capacity—the total BTC locked in its channels—now sits at 4,550 BTC, the smallest amount since September 2023, according to data collected by theblock.co. On Feb. 12, 2025, the figure stood at 5,370 BTC, meaning 820 BTC has exited the system in this period.
Source: theblock.co data Lightning Network capacity all-time to March 21, 2025.
At current BTC prices, this $69 million reduction leaves the protocol’s total value locked (TVL) at $383 million. The drop coincides with muted activity on Bitcoin’s base layer (L1) and the proliferation of rival L2 solutions, including those built with rollup frameworks.
Diminished L1 transaction fees have made it less costly for users to close Lightning channels, as these actions depend on onchain transactions. With lower fees reducing the financial burden of channel management, participants are increasingly moving funds back to Bitcoin’s primary chain.
This contraction reflects broader shifts in Bitcoin’s ecosystem, where quieter L1 conditions and reduced fees lessen the appeal of maintaining L2 channels. New L2 entrants employing technologies like sidechains and rollups could intensify competition, marking a critical juncture for Bitcoin’s layered architecture and how users balance scalability with cost efficiency.
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