Data shows potential weaknesses of the Bitcoin scaling solution

The Bitcoin (BTC) network isn’t ideal for small transactions. A new one is only created every ten minutes block full of transactions added to the blockchain. As network capacities are somewhat limited, transaction costs can be quite high at times when many transactions are being sent. The Lightning Network is a Layer 2 scaling solution created to solve these problems. However, the data shows that the scaling network is somewhat centralized. Do we need to worry?

Bitcoin Lightning Network Centralized?

Out of Data from MemPool Space shows that about 48 percent of all Bitcoin Lightning Network node is hosted by the central cloud service providers Amazon Web Services (AWS) and Google Cloud. Specifically, about 29 percent of all Lightning Network nodes are deployed on AWS, while 19 percent are hosted on Google Cloud.

From this it can be concluded that the Lightning Network relies heavily on centralized cloud services. Deploying centralized solutions can often guarantee high uptime and reliability, but at the expense of decentralization.

The Lightning Network creates outside the chain Transactions via so-called payment channels possible. This allows users to make lightning-fast and low-cost transactions. You can think of the Lightning Network as a payments layer on top of the Bitcoin network. All kinds of small transactions can be done outside of the blockchain and only the opening and closing of the payment channel is verified on the bitcoin blockchain.

In the Lightning Network, your transaction finally reaches the desired recipient via various nodes. The nodes must therefore be constantly online in order to carry out the transactions. If either party does not respond, the right to any funds within the channel is lost. To prevent this, many node operators use centralized cloud services.

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Google Cloud supports the Bitcoin scaling network

Earlier this year, Google Cloud partnered with Voltage, an infrastructure provider specializing in the Lightning Network. This expands Voltage’s hosting capabilities and makes it easier for customers to build Lightning nodes using the combined capabilities of Voltage and Google Cloud.

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