The Lightning Network: Turning Bitcoin into Money

Anantha Divakaruni and Peter Zimmerman

No 22-19, Working Papers from Federal Reserve Bank of Cleveland

Abstract: The Lightning Network (LN) is a means of netting Bitcoin payments outside the blockchain. We find a significant association between LN adoption and reduced blockchain congestion, suggesting that the LN has helped improve the efficiency of Bitcoin as a means of payment. This improvement cannot be explained by other factors, such as changes in demand or the adoption of SegWit. We find mixed evidence on whether increased centralization in the Lightning Network has improved its efficiency. Our findings have implications for the future of cryptocurrencies as a means of payment and their environmental footprint.

Keywords: bitcoin; blockchain; cryptocurrency; Lightning Network; payments (search for similar items in EconPapers)
JEL-codes: E42 G10 (search for similar items in EconPapers)
Pages: 18
Date: 2022-06-21
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac, nep-mon, nep-net and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: The Lightning Network: Turning Bitcoin into money (2023)
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DOI: 10.26509/frbc-wp-202219

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