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What is Lightning Network? Intro to Bitcoin Lightning Payments

When it comes to Bitcoin payments or the transfer of digital currency, there is a fast and secure solution called lightning network. It has many features that solve the pre-existing issues of the layer one solution. Lightning network is a concept introduced previously and developed a few years back, but still, there may be some doubts about this topic.

In this blog, we will cover the lightning network; with this, you can decide its relevance to your fund transfer requirements.

What is the Lightning Network

Functionality was the primary consideration when Bitcoin came into existence. But it is different from what we came across. The main idea behind the formation of Bitcoin was to provide a scalable method for users to operate their digital currencies from anywhere without identity theft.

This idea has gained popularity but also makes the whole transaction process slow and monetarily inefficient for the users. So, to improve the downfalls in this, developers came up with different layers of digital currency transfers.

The primary layer of this was the blockchain, which keeps all the transaction records and works as a supporting branch for its subordinate layers. Similarly, the second layer is formed, termed a Lightning Network (LN).

Lightning Network is the more scalable second layer that uses multiple micropayment channels, making the transaction faster and more efficient than the previous system. It can also be an off-chain transaction mechanism for other digital currencies.

With the help of this layer, two individuals or businesses can conduct all the payments through various channels. They can complete multiple transactions within the same track. With the introduction of LN, transactions became faster and more configured. It also cuts down on the cost of transactions with minimum fees.

Definition of Lightning Network

Lightning Network is a secondary layer over the blockchain that enables fast transactions and reduces network congestion and functionality issues.

History of Lightning Network

When problems and issues arise with the then-existing system, introducing a more effective solution as a second layer comes through. The idea to introduce this network was proposed by Joseph Poon, an American academic and author, in collaboration with Thaddeus Dryja, a Ph.D. candidate at the same university where Mr.Poon teaches.

They first proposed this idea through a white paper in 2016, and after that, it went under development. During the development phase, they were mainly focused on solving the problem of slow transactions in the Bitcoin structure. After all the research, the 1st beta version of the lightning network was launched in March 2018. In this version, minimum fee transactions are quickly settled, and a bundle of transactions can be done with the same channel from both ends of the individual.

From the imagination to its current version, many features got involved in the lightning network. It was first implemented on Bitcoin but now can be used with multiple cryptocurrencies.

Importance of Lightning Network

In the varied environment of digital currencies, there are multiple factors a user considers before switching to these modes of currency transfer. If the individuals feel safe and can make transactions with minimum effort, this switch becomes easy for them to adapt.

Similarly, a lightning network solves many of the user’s concerns through its characteristics like:

  • Fast and efficient payment: From small to large, every transaction is efficient, and its settling time is a minimum of some seconds.
  • Less configure time: Due to robust nodes, the transactions are fast and get settled in the network with less time and provide configuration.
  • Minimum fee on single and multiple transactions: In a lightning network, the nodes process all the data and then pass that on; therefore, charges are minimum for single and multiple transactions.
  • Security by blockchain data center: When the channels close, the cluster data gets stored in the main blockchain, providing safety for the data.
  • Records of transactions in bundle form: To make the whole payment process faster, all the single payments are not sent to the blockchain despite that a bundle of information gets shared after all the transactions are done.
  • Multiple payments through Single Channel: When two parties create a single channel, they can perform transactions of any amount numerous times until the channel gets closed by either one of them.
  • Equal authority to both parties: A channel is created between two parties, and both can operate the channel with the same authority and legality. Everything can be done from both ends, from transferring funds to closing the channel.

These purposes of LN make it a reliable and fast method in digital transactions.

What is Bitcoin Lightning Payment

what is bitcoin Lightning paymentsBitcoins are the first cryptocurrency and also the first one to provide lightning payment. It is a peer-to-peer method of transaction where two users can receive and send money to each other. With the help of a lightning network, payments can be made without any delay. Bitcoin lightning network payments are more scalable than that bitcoin on-chain; transactions are made outside the main blockchain with proper management. Bitcoin lightning network payment has a capitalized benefit from the cryptographic security of blockchain.

How Bitcoin Lightning Payment is Relevant to Users

Scalability is the foremost reason why people are adopting cryptocurrency in large amounts. With the support of scalability, blockchain can handle many transactions per second; it ensures that users pay fewer fees for the transaction by using off-chain validation. As a result, solutions like layer-2 present viable reasons for pursuing new use cases of Bitcoin.

Bitcoin lightning payments are also helpful in reducing the cost of energy and speeding up the processing time of transactions. In this, the routing fees are low; hence most of the transactions get clear in no time. Once the routing fee is paid, the transaction gets validated, which implies that the more the transaction, the more they earn hence providing fast payment rates.

In many e-commerce sites, there are multiple payment options to choose from. In the retail and hospitality department, payments need to be fast, and data must be reliable; in that case, bitcoin lightning payment will be a practical option for its users. It attracts customers of different age groups; similarly, introducing Bitcoin payment in their store will attract another sector of young customers. Fast on-time payments will reduce counterparty risk for the users.

How Does a Bitcoin Lightning Payment Work

There is a set of flows that various payment methods used to make it function properly. In Bitcoin lightning network payment, if two users have to conduct a transaction, they first need to make a channel. Digital currencies like Bitcoin also use a flow to complete the transaction.

After forming this channel, the payer has to insert the amount of Bitcoin he wants to send. When this inserted amount gets locked in the channel, it can be sent to the receiver through a lightning network. Minimum nodes are involved in these transactions, and a smart contract ensures that all the rules are adequately considered. When a transaction is finished, there are two options both users have.

Either they close the channel or continue the same channel; a certain amount has to be added all the time when there is a withdrawal. Both parties can transfer their funds individually without involving the main blockchain.

When all the required work gets completed with the channel, and any users want to close the channel, they can do that. By doing this, all the small transactions are combined in a bundle and securely updated on the main blockchain. Various small transactions are hard to validate for nodes, and these bundles are easy to handle and analyze.

Advantages and Setbacks of Bitcoin Lightning Payment

Although digital currencies are taking over the world with their advanced features and lightning-fast payments, there are some benefits and setbacks one should be aware of. Let’s get to know about them here.

Pros Cons
Provide safe and fast transactions of Bitcoin. Offline transactions are not supported in the lightning network.
Even small amounts get processed and settled easily. There is a lot of reliability on the other peer for validating a transaction.
Minimum charges over the transactions. Its security reliability may not be appropriate for large transactions.
Each transaction does not go to the public ledger, which keeps them anonymous.



There are many curious questions about the topic of the lightning network when someone steps into the crypto world. Getting all in a place where you understand the features and advantages takes a lot of work.

We have built a complete blog where you can find answers to all your doubts about what is a lightning network and an intro to Bitcoin lightning payment.

Speed Team