What is the Bitcoin Lightning Network?

Bitcoin's lack of support for small transactions can be overcome by Lightning Network

Bitcoin Lightning Network is a decentralized system for instant, high-volume micropayments that removes the risk of delegating custody of funds to trusted third parties. This network solves various problems in the world's first cryptocurrency, Bitcoin.

It is also known as a Layer 2 payment protocol built on top of blockchain-based cryptocurrency. The same protocol can also be used in Litecoin, another popular cryptocurrency built in 2013 by Charlie Lee, an ex-Google employee.

Even though Bitcoin is the world's most widely used and valuable digital currency that allows anyone to send value without a trusted intermediary or depository, there are some drawbacks in its decentralized design. 

It takes up to an hour or more to complete transactions on the Bitcoin blockchain before they are irreversible. This might make micropayments, or payments of less than a few cents,  inconsistently confirmed, and fees could also render such transactions unviable.

The advent of the Lightning Network solves these problems. It is one of the first implementations of a multi-party smart contract using Bitcoin's built-in scripting. 

Let us check the issues Lightning Network solves.

Instant payments

It takes only a few seconds to settle payments as the Lightning Network doesn’t need to wait for network confirmations. Lightning can be used at retail point-of-sale terminals, with user device-to-device transactions, or anywhere instant payments are supported.

If a transaction is made on Bitcoin Blockchain, it aggregates transactions into blocks spaced ten minutes apart. Payments are widely regarded as secure on Bitcoin after confirmation of six blocks or about one hour. 


The Bitcoin blockchain currently enforces a high minimum output size and a fixed per-transaction fee which makes micropayments impractical. But, Lightning enables one to send funds down to 0.00000001 bitcoin without custodial risk. Lightning also allows minimal payments denominated in bitcoin, using actual bitcoin transactions.


The Bitcoin network will need to support an increasingly higher transaction volume to meet demand from automated payments. The coming increase in internet-connected devices needs a platform for machine-to-machine payments and automated micropayment services. Lightning Network transactions are conducted off the blockchain without delegation of trust and ownership, allowing users to conduct nearly unlimited transactions between other devices.

How it Works

To initiate transactions on Lightning Network, funds are placed into a multi-signature channel Bitcoin address. To spend the funds, both parties need to decide on a new balance for making any number of Lightning Network transactions. 

Parties are free to send as much Bitcoin as they want to each other, with the maximum limit of the amount of Bitcoin being sent to the channel when they open it.

The Lightning Network does not require cooperation from the counterparty to exit the channel. Since all parties have multiple multi-signature channels with many different users on this network, one can send a payment to any other party across this network. 

The Lightning Network always makes sure that the funds will reach their destinations even when there are no direct relations between the sender and the receiver. The network will look for possible indirect paths to reach the intended destination, otherwise, it will issue a refund.

By embedding the payment conditional upon knowledge of a secure cryptographic hash, payments can be made across a network of channels without the need for any party to have unilateral custodial ownership of funds. 

The Lightning Network enables what was previously not possible with trusted financial systems vulnerable to monopolies, without the need for custodial trust and ownership. 

Bitcoin’s Lightning Network could cross 700 MN users by 2030

With the valuation of Bitcoin picking up once again and more nations mulling to adopt Bitcoin as a legal tender after the adoption by El Salvador from June 2021, the adoption of the Lightning Network, a second layer protocol built providing a radical solution to Bitcoin’s scaling limitations, is surging as well.

According to an Arcane Research report, with the use cases of remittance, streaming and gaming scaling, the number of Lightning Network users could cross 700 million by 2030

The Lightning Network is built as a second layer on top of the Bitcoin blockchain, enabling private payment channels to be established between parties. This is seen as a method for enabling cheaper and faster payments, while still ultimately retaining the security and trustlessness of base layer Bitcoin.

Twitter CEO, Jack Dorsey in a virtual conversation advocated for the adoption of Lighting Network in Bitcoin Blockchain and said that it would be good for the industry. Bitcoin with a layer 2 system could be scaled to do a vast number of transactions.

Jack Mallers, CEO of Lightning-focused company Strike has partnered with the government of El Salvador to announce its plans to make Bitcoin a legal currency in that country. Since this proclamation in June, the rollout has been proceeding smoothly. In the period of approximately two months after this announcement, the network’s overall capacity grew by some 46%. 

Adding about 1,500 bitcoins to the entire system and about 15,000 new nodes to carry out transactions, the capacity of the Lightning Network has risen to meet a wide variety of possible stress tests that have not yet occurred.

The Lightning Network can make Bitcoin a native currency of the internet and will also add more value for the adoption of Bitcoin in the everyday life of citizens globally

Adding Lighting to World's number one crypto Kleverly!

Jagdish Kumar

Klever Writer

Follow me on Twitter.com/TokenBharat

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