Fresh data reveals that Bitcoin’s Lightning Network provides considerably cheaper transaction fees compared to legacy payment networks such as Visa and Mastercard. According to recent data from Glassnode, the median fee rate to send value across the Lightning Network is only 0.0029%, a fee that is 1,000 times cheaper than the fee charged by Visa or Mastercard payment processors.
The lead analyst at Glassnode, James Check, believes that the median fee charged per 1 BTC sent across the Lightning network is presently 3,000 satoshis, which is the equivalent of $0.84 to send $28,800 worth of value. This indicates a fee of only 0.0029%. In comparison, this rate is significantly less than the fees charged by leading credit card companies, as noted by Bitcoin analyst Dylan LeClair.
The Lightning Network is a layer-2 payments solution that enhances Bitcoin’s effectiveness as a payment option. Its transaction fees have been steadily declining since November 2021. Legacy payment networks like Visa and Mastercard are known to charge merchants a fee of around 2-3% per transaction, making them an expensive option for businesses.
In a forthcoming Cointelegraph documentary shot in Cape Verde, the business owner of one of the few businesses that accept Bitcoin revealed that accepting foreign Visa and Mastercard costs over 8%. This shows that Bitcoin’s Lightning Network offers significantly cheaper transaction fees for merchants, thereby making it a more profitable payment option.
However, there have been concerns about the throughput of the Lightning Network. James Check explained that the typical channel size is smaller than 1 BTC, with the median channel size being 0.02 BTC and the mean being 0.08 BTC. This indicates that the Lightning Network is well-suited to transactions below $1,000. In such a case, payments over $1,000 might be better suited to the Bitcoin base chain to avoid payment failure or misfire.
Many Lightning Network users take advantage of custodial wallets such as the Wallet of Satoshi and Alby to make micropayments on social media apps like Nostr. However, Bitcoin early adopters have noted the growing preference for custodial solutions, despite the “not your keys, not your coin” mantra. Solutions such as Fedi and Cashu could potentially provide semi-custodial solutions that could undermine reliance on fully custodial options.
In conclusion, the Lightning Network offers a low-cost and fast payment solution that is significantly cheaper than legacy payment networks. Its transaction fees have been steadily declining, and it remains well-suited for transactions below $1,000. While it is not perfect, its use is likely to continue growing, and it will become an attractive option for merchants seeking profitable payment solutions.
