Visa, MasterCard cost 1000x more than BTC Lightning Network

According to recent data from Glassnode, Bitcoin’s Lightning Network is considerably less expensive to use than legacy payment networks.

The median fee rate, or the cost of sending value over the Lightning Network, is 0.0029%, which is 1,000 times less expensive than MasterCard or Visa payment processors.

The median fee rate, or the fee levied per 1 BTC sent across the Lightning Network, is presently 3,000 Satoshis (the smallest unit of Bitcoin), according to James Check, the principal analyst at Glassnode. That is “equivalent to $0.84 to send $28,800 worth of value […], which is a fee of 0.0029%.”

“Pretty remarkable when you think about it.”

Bitcoin analyst Dylan LeClair noted in a post on the Nostr social media protocol that this rate is significantly lower than that levied by major credit card companies.

The Lightning Network, a layer-2 payments solution constructed on top of the world’s largest cryptocurrency, was initially proposed as a method of making Bitcoin a viable payment method.

Since November 2021, these data indicate that it is not only quick but also inexpensive, as the average fee rate has been consistently declining.

The transaction fees charged by legacy payment networks such as Visa and Mastercard to merchants are approximately 2% to 3%, making them an expensive option for businesses.

In addition, Glassnode’s Check referred to users who administer their nodes and channels. Numerous Lightning users utilize custodial wallets like the Wallet of Satoshi and Alby to make micropayments on social media apps like Nostr.

Some Bitcoin early adopters have observed a growing preference for custodial solutions (as the Bitcoiner maxim is “not your keys, not your coin”), but semi-custodial solutions such as Fedi and Cashu may undermine reliance on entirely custodial solutions.

In addition, the throughput of the Lightning Network could be questioned. Check described:

“Of course, we must also consider that the typical channel is smaller than 1 BTC. The median channel size is 0.02 BTC and the mean is 0.08 BTC, so overall the Lightning Network remains well suited to payments below $1,000.”

In the graph below, the channel capacity is increasing but remains well below $10,000. To avoid payment failure or malfunction, payments over $1,000 may be better adapted to the Bitcoin base chain in this scenario.