What is the Lightning Network?
The Bitcoin blockchain is not able to process a very high number of transactions per second. It is built for security and size rather than speed. In fact, the Bitcoin network can only process about 7 transactions per second, and the confirmation time for a Bitcoin payment is around 10 minutes.
How Does the Lightning Network Work?
The Lightning Network enables Bitcoin payment channels between two parties to be opened up off of the main Bitcoin blockchain. Transactions are made between parties across those channels instead of on the main Layer 1 blockchain. The payments in these channels can be seen between the parties, without the balances having to be broadcast on the main Bitcoin blockchain until a later time when the channel is ready to be closed.
The Bitcoin Lightning Network is still in early-stage development but as you can see by the Lightning data live charts on this site, it is growing over time.
The Lightning Network is seen as a very important project for the future growth and success of Bitcoin. It will allow for day-to-day cryptocurrency payments to be made in Bitcoin which are not practical using the main Bitcoin blockchain.
The Lightning Network Offers...
- Instant Payments: Transaction speed is typically milliseconds. It relies on blockchain smart contracts rather than having to wait for block confirmation times on the main blockchain.
- Scale: The Lightning Network can process many millions of transactions per second.
- Low fees: Because the transactions are settled off-chain, the Lightning Network makes micropayments in bitcoin feasible as the fees are extremely low.
Mobile Wallets
Here is a list of mobile wallet providers, should you be interested in experimenting with the Bitcoin Lightning Network.
Some of these are still in development testing so you should never deposit large amounts of money onto them:
Lightning Network + Your Own Node
If you want to use Lightning Network AND run your own Bitcoin node, then one of the best options on the market currently is Umbrel (https://getumbrel.com/). We have no affiliation with them but feel they deserve a special mention as they offer a very simple setup to run a Bitcoin node, where you can be up and running in 5 minutes once you have the equipment. Plus it then also allows you to use the Lightning Network for fast bitcoin payments. You can be a self-sovereign, node running, Lightning Network using Bitcoiner.
Implications for Lightning Network
As the gig economy grows, more and more people are looking for fast, direct, easy to use, payment methods. Lightning Network offers such a solution and in doing so, opens up a world of possibilities. With Lightning Network we will be able to send micropayments to musicians, artists, people who help us in our day-to-day lives, anyone else who has a Lightning connection.
It also has the potential to transform the cross-border payments industry, disrupting market incumbents such as Western Union. Unlike the traditional cross-border payments industry, no infrastructure is needed. Because Lightning is an open network, anyone can set up a Lightning channel and start making cross-border payments. So hardworking immigrant workers no longer need to pay high fees (anywhere between 10-40%) to payment companies, they can transfer funds to family and friends back in their home country for a fraction of a cent.
Lightning Network adds another dimension to Bitcoin
Up until this point, Bitcoin has primarily been used by many as a store of value, which is why it is often referred to as 'digital gold'. It has not been fit for purpose to be used like a currency because of slow transaction times. With Layer 2 Lightning Network, Bitcoin has the potential to enter a new era where it is also used for regular payments, to anyone anywhere in the world. With Lightning Network, Bitcoin has the potential to be the currency of the digital era...fast, immutable and decentralized. The currency of the 21st Century.
Learn More
For more in-depth information about the Lightning Network, a comprehensive library of resources is at: https://www.lopp.net/lightning-information.html
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