What Is the Lightning Network?
The Lightning Network is a Layer 2 payment protocol built on top of Bitcoin that enables instant, low-cost transactions by moving them off the main blockchain. It uses payment channels and multi-hop routing to allow users to transact without waiting for block confirmations.
Payment Channels
Two parties lock bitcoin into a 2-of-2 multi-signature address to open a channel. They can then transact instantly off-chain by updating the channel balance. Only the opening and closing transactions touch the main blockchain.
Key Features
Instant Payments
Lightning transactions settle in milliseconds rather than waiting for confirmations. This makes Bitcoin practical for everyday purchases like coffee, where waiting 10+ minutes is impractical.
Micro-Fees
Lightning fees are typically a fraction of a cent, regardless of transaction size. This enables micropayments and streaming payments that would be economically impossible on the main chain.
Lightning uses HTLCs for routing payments through intermediate nodes, enabling transactions between parties without direct channels. Features like splicing continue improving its usability. The network relies on Bitcoin's security while dramatically improving scalability.
Quick Facts
- •Enables millions of transactions per second
- •Transactions settle instantly
- •Fees are typically less than 1 satoshi
- •Network of payment channels