MemPool Space data on August 2 shows that roughly 48% of all Bitcoin Lightning Network (LN) Nodes are hosted by major centralized cloud service providers, namely Amazon Web Service (AWS) and Google Cloud. Specifically, approximately 29% of Bitcoin Lightning Network nodes are deployed on AWS, while 19% are hosted on Google Cloud.
This trend points to the high reliance of Bitcoin Lightning Network node operators on centralized cloud services. Unlike operating a local node, reliant on centralized solutions can offer a high degree of uptime and reliability, reaching nearly 100%.
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Over-Reliance On Google Cloud And AWS?
Bitcoin’s network comprises nodes operated by miners from all over the world. This contrasts with the more centralized approach taken by Google Cloud and AWS. Despite mining farms and pools being dominant in mining activity, thousands of individual Bitcoin miners are distributed across the globe.
That the Bitcoin Lightning Network is powered by nodes deployed primarily on Google Cloud and AWS raises awareness of an inherent challenge within the Lightning Network architecture. While the Lightning Network facilitates off-chain BTC transactions through channels, enabling nearly instant settlements and lower fees, node operators must maintain a constant online presence to execute these transactions.
Both parties must be online in the Lightning Network to initiate transactions for the smart contracts to update. If one party doesn’t respond, they may lose the funds in the channel. Many node operators use centralized cloud services like Google Cloud and AWS to avoid this.
Voltage, a Lightning as a Service (LaaS) platform, partnered with Google Cloud in May 2023 to enhance scalability. In a statement, Voltage said the collaboration will empower users to establish Bitcoin and Lightning Nodes across a diverse range of locations, utilizing the combined capabilities of Voltage and Google Cloud.
Voltage through Google Cloud has onboarded 87 Bitcoin LN nodes when writing on August 2. Still, most BLN nodes, currently at over 550, are deployed on AWS. The cloud provider started supporting the deployment of BLN in 2022.
More BTC On Ethereum Than Lightning Network
As of August 2, the collective capacity of the Bitcoin Lightning Network has exceeded $138.4 million in BTC, facilitated by a network encompassing over 15,500 individual nodes. However, adoption has been relatively low while the Lightning Network has succeeded, allowing users to transact with instantaneous settlements without necessarily waiting for 10 minutes or more.
More coins are being tokenized and moved to smart contract platforms like Ethereum or the BNB Chain for more yields via decentralized finance (DeFi). Dune Analytics data reveals more BTC has been transferred to Ethereum and even less locked in Bitcoin Lightning Network nodes.
Feature image from Canva, chart from TradingView