Bitcoin News Today: Lightning Network Capacity Drops 20% in 2025 Amid Structural Evolution

Bitcoin’s Lightning Network capacity has declined from over 5,400 BTC in late 2023 to around 4,200 BTC by August 2025, a roughly 20% drop, according to data from mempool.space. At first glance, this contraction might suggest waning interest in the second-layer payment network. However, analysts and developers argue that the decline reflects a shift in the network’s structure and usage patterns, rather than a decline in its utility or adoption [1].

The Lightning Network’s capacity metric refers to the total amount of Bitcoin locked in publicly advertised payment channels, which facilitate the routing of peer-to-peer transactions. However, this number does not account for private channels, custodial flows, or multi-path routed payments. As noted in River’s 2023 Lightning report, the growth of routed transactions can significantly outpace capacity increases. Between August 2021 and August 2023, Lightning routed payments surged by 1,212%, despite only moderate growth in public capacity at the time [1].

Recent developments have further underscored the network’s expanding utility. Coinbase integrated Lightning in 2024, and by mid-2025, Lightspark reported that approximately 15% of Bitcoin withdrawals on the platform were processed via Lightning [1]. CoinGate, a European crypto payments processor, also noted a resurgence in Bitcoin’s share of crypto payments in 2025, with internal data attributing part of this shift to the growing use of second-layer networks, including Lightning. By 2024, Lightning had already accounted for over 16% of all Bitcoin orders on CoinGate’s platform, up from 6.5% two years earlier [1].

The decline in public capacity coincides with a steady reduction in public node and channel counts since 2022. Developers attribute this trend to the consolidation of routing through more efficiently managed hub nodes and the adoption of protocol enhancements such as channel splicing, which allows wallets to resize channels without on-chain transactions. These improvements reduce the need for new channels and optimize liquidity usage [1].

In January 2025, Tether announced the rollout of USDt over Lightning via Taproot Assets, in partnership with Lightning Labs. This move enables dollar-denominated payments and stablecoin-backed remittances on the network without requiring BTC to be locked in channels, effectively decoupling usage from Bitcoin-denominated capacity metrics. Lightning Labs CEO Elizabeth Stark emphasized that the integration combines Bitcoin’s security with the speed and scalability of the Lightning Network [1].

At a structural level, ongoing research and development are addressing challenges such as payment reliability and channel health. Issues like jamming attacks and replacement cycling vulnerabilities are being tackled through the Bitcoin Optech working groups, while innovations like BOLT12 Offers and liquidity automation tools are enhancing the network’s robustness for commercial use [1].

Moreover, new application layers are expanding the Lightning protocol’s use cases. L402, a specification that enables pay-per-request APIs using Lightning-native authentication and micropayments, has already been deployed in early AI agent stacks such as LangChainBitcoin. This design allows automated agents to pay per inference call or API response without requiring fiat accounts or static keys, introducing a new stream of machine-to-machine payments that do not depend on capacity growth [1].

These protocol and use-case developments provide context for why public capacity alone is no longer a complete indicator of the Lightning Network’s adoption trajectory. Developers argue that the current evolution is less about expanding visible liquidity and more about maximizing the utility of each satoshi already in motion [1].

While public capacity may be declining, underlying metrics on usage, integration, and technical progress tell a different story. The Lightning Network is undergoing a structural evolution that enhances its functionality and scalability, signaling continued relevance and potential for broader adoption.

Source: [1] Why Lightning Network capacity declining 20% in 2025 is NOT as bad as it sounds (https://cryptoslate.com/why-lightning-network-capacity-declining-20-in-2025-is-not-as-bad-as-it-sounds/)