Last year, I watched a friend get paid in Bitcoin instantly. Not 10 minutes later, or after waiting for confirmations. I mean instantly. His client sent the payment in smaller amounts, and he received each one in seconds. No delays, no stress!
This was my first time hearing about the Bitcoin Lightning Network, and it completely changed how I saw crypto payments.
Turns out, Bitcoin isn’t as slow and expensive as people think. You just need the right tool. And that’s exactly what the Lightning Network is: a faster, cheaper way to use Bitcoin.
This article talks about this upgrade. It could change how we use Bitcoin, especially for freelancers and crypto beginners.
What Is the Bitcoin Lightning Network?
The Bitcoin Lightning Network, or just Lightning Network, is a second-layer payment system on Bitcoin. It was proposed in 2016 by Thaddeus Dryja and Joseph Poon to solve Bitcoin’s scaling issue.
Lightning Network (LN) establishes payment channels between users on a second layer, allowing secure, decentralized transactions off the blockchain. The Bitcoin Lightning Network enables fast, low-fee payment between users, thereby hugely boosting Bitcoin’s capacity.
How Payments Work on the Bitcoin Lightning Network
The Lightning Network employs a unique type of wallet called a multi-signature wallet, which is shared by two users, A and B. They fund this shared wallet with Bitcoin prior to anything that they do.
This process is referred to as a funding transaction, and it’s the only time the main Bitcoin blockchain is used until they decide to close their channel.
A and B can send Bitcoin back and forth as many times as they want when enabled. Each transaction updates their balance. These transactions are fast, cheap, and don’t touch the main Bitcoin network. Overall balance is simply shared with the blockchain when the channel is finished and closed.
Lightning Network isn’t just limited to one-to-one transactions. It’s built for a wider network of connections. So, even if A hasn’t got a direct line with D, he could still transfer Bitcoin by relaying it to him via B or others.
It’s like using mutual friends to pass a message. It forms a kind of web of connections, making the Lightning network decentralized and adaptable.
To make this work, the Lightning Network uses special smart contracts as well as scripts. When users open up a channel, there are no private keys that are ever shared. Instead, they exchange a shared key that will be used to authenticate each transaction, called commitment transactions.
These are like promises that update who owns what. Only when the channels are closed do the parties exchange final keys to settle up on the main chain.
What Sets The Lightning Network Apart?
Having witnessed how operations are performed at the Lightning Network, let us see why this is best suited for daily transactions.
Real-Time Payments, Not Delays
Bitcoin is great at many things, but it also has a big weakness in speed. The base Bitcoin network can process about 3-7 transactions per second. Confirming a single block will take 10 minutes on average. Most people wait for six blocks, which can take up to an hour. That’s too long for fast payments.
Lightning Network pays right away. Payments are confirmed within a few seconds whenever a payment channel is created. There is no waiting around, no prolonged confirmations, and no blockchain congestion.
It also provides cross-chain atomic swaps. Therefore, users can transfer assets from one blockchain to another without relying on a centralized exchange.
Almost Zero Fees
Bitcoin transaction fees can change a lot. They sometimes reach up to $60 or more. That is not acceptable and is too high for small payments. Even when things are calm, fees can still be between $3 to $30. This makes using Bitcoin for everyday activities difficult.
Lightning Network does this differently. You can send small amounts, such as 1 satoshi (0.00000001 BTC), with a very low fee. This makes payments both cheaper and easier to conduct.
And the best part is that it works well with apps like the Muun Wallet. That gives you a simple way to accept real payments with Lightning Network.
Munn Wallet
Muun is a simple, safe mobile wallet. It can process Bitcoin payments as well as payments using the Lightning Network. You don’t need to set up an entire Lightning node or go through a technical process.
Why Muun Wallet?
- Muun is easy to manage. The interface is as simple as that of a basic wallet app. It’s clean and easy for beginners, without too many complicated settings.
- Lightning payments are supported automatically by it. You don’t have to know anything about how Lightning works. Simply send or receive Bitcoin, and Muun will handle the rest.
- It manages fees smartly. It finds the best route and shows you the exact fees. So, you’re not surprised by how much you pay.
- It is designed to be fully secured. They utilize current security such as backup and multi-signature software to keep your assets under safeguard.
Why The Lightning Network Changes Everything
Bitcoin’s blockchain wasn’t made for fast or small payments. Each block can hold only a few transactions. This leads to delays and high fees when there is congestion within the network.
This makes payments using Bitcoin for small amounts very costly. The Lightning Network corrects this by handling small payments off-chain.
Users create a channel by funding a multisig wallet on Bitcoin. They may then move bitcoins between each other off-chain without being charged outrageous fees. Some benefits of using the Lightning Network are as follows:
Built for Scale
It works off-chain, which means millions of small payments can be made without slowing up the main chain at all. It also supports atomic swaps, such that trades can occur directly between different cryptocurrencies without an exchange being needed.
Transaction Speed
Lightning Network payment settlement happens within milliseconds, much faster than Bitcoin’s 10-minute blocks. It is not just catching up with older systems but is set to surpass them.
Empowering Micro and Everyday Payments
Lightning Network began with small payments but is gradually being used for real-world needs. In Ethiopia and El Salvador, unbanked individuals are able to send and receive money easily.
Privacy and Control
Lightning Network gives digital freedom to end-users. Its usage isn’t just limited to payment but is also being used as a basis to construct new privacy technologies. Projects like Keet and Breez are using it to construct decentralized chat, privacy-enabled VPNs, and identity protocols.
Challenges Facing the Lightning Network
Despite its potential, there are disadvantages to using the Lightning Network. Setting up funding channels requires locking up Bitcoin first. Other users may not like it as it can be seen as inconvenient or risky.
In addition, opening and closing channels are associated with normal on-chain fees. That is, there’s a fee to join as well as exit the network. Routing of payment sometimes fails whenever there is no liquidity within channels.
It gets easier to transact using the Lightning Network, but not quite as easy as with regular apps. The utilities and wallets are getting better, but still rather technical. It’s not as simple as just clicking and sending like most apps we use.
Where Bitcoin Lightning Network Could Take Us Next
Lightning Network is just one giant step for Bitcoin. They can potentially make Bitcoin usable for everyday spending and to move funds everywhere around the globe. It offers new ideas and new apps to be built upon as well.
Overall, this can be the change that brings Bitcoin closer to real-world use for everyone.
Featured Image: Freepik
About The Author
