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What is bitcoin lightning network? The lightning network is a second-layer solution implemented on top of the Bitcoin blockchain. It allows for small-scale Bitcoin transactions to be made instantaneously with minimal fees using a system of off-chain payment channels. In this article, we will go over how these payments work and how to start using the Lightning Network to make payments of your own.
How does the Lightning Network work?
The Lightning Network uses peer-to-peer payment channels to facilitate Bitcoin transactions between parties. These channels allow multiple transactions to be performed back and forth with only the final balance is recorded to the main Bitcoin network.
For example, Bob is a regular customer at Alice’s coffee shop. A coffee at Alice’s shop costs 0.001 BTC. Instead of Bob needing to make a new Bitcoin transaction each time he wants a coffee (and paying the high fee) he opens up a Lightning Network channel instead.
Now Bob can move a larger sum of Bitcoin to the Lightning Network channel for a one-time fee, and each time he wants to buy a coffee, he and Alice can update the balance in the channel to reflect that the ownership of 0.001 BTC has been transferred to Alice.
This method means that Bob will not need to pay excessive fees each time, and Alice won’t need to wait the lengthy transaction confirmation time.
But what if Bob wants to buy a loaf of bread from Carol at the bakery down the road using the Bitcoin he’s moved onto the lightning network too? Will he need to set up a new payment channel with her and incur another fee?
Well, if Carol is also a customer at Alice’s coffee shop, and has set up a separate Lightning Network channel with her, then Bob does not need to set up a separate channel with Carol.
As more and more users join the Lightning Network, it begins to function more like a large hive. Allowing for payments to be made between all parties connected to it.
How to start using the lightning network?
Step 1: Download a Bitcoin Lightning wallet
The first step is to download a Bitcoin wallet that allows for Bitcoin Lightning Network transactions.
Some of the leading Lightning Network wallets available include:
All of these wallets can be downloaded to your mobile device through the App Store or Google Play Store.
Step 2: Move some of your Bitcoin to the Lightning Network
Now that you have your wallet, you’ll need to move your existing ‘layer 1’ Bitcoin to the ‘layer 2’ Lightning Network.
The easiest way to achieve this is to use an exchange.
Bitfinex is the leading custodial exchange that offers Bitcoin Lightning Network services, and exchanges such as ZigZag and Boltz are leading the way on the non-custodial front.
Once you have converted your Layer 1 BTC to Lightning Network BTC, you can simply send it to your wallet and get ready to start using it for payments.
Muun wallet works even more seamless. You can send on-chain BTC to your wallet and use them for Lightning Network payments.
Step 3: Make a Payment
How do you pay with Bitcoin Lightning? Unlike regular Bitcoin payments, Lightning Network payments require the receiver to send you a payment request before you can send your funds to them.
Generally, the receiver will generate a QR code that represents the payment request that you can simply scan and confirm within your wallet.
Alternatively, you may be presented with a ‘Lightning Invoice’, which will look like a long string of random letters and numbers (similar to a BTC address). You can then copy and paste the invoice into your wallet and confirm the payment.
All the above is done within the available wallets and the process is quite straightforward, so anyone that owns Bitcoin can use it.
If you would like to try to pay for something try Bitrefill.
The lightning network is already quite established and well-connected globally. To start using it for your everyday payments, all you need is a Lightning Network app, some Bitcoin, and to follow a few simple steps to begin transacting on the network.
