What is the Lightning Network?
The Lightning Network is a "layer 2" payment protocol that operates on top of Bitcoin. It enables instant, low-cost transactions and helps Bitcoin scale to millions of transactions per second.
The Scaling Problem
Bitcoin's main blockchain has limitations:
- New blocks are created only every ~10 minutes
- Each block has a limited size (around 1MB)
- This results in ~7 transactions per second capacity
- Transaction fees can become high during busy periods
For Bitcoin to serve as a global payment system, it needs to handle millions of transactions per second. The Lightning Network provides this scaling solution.
How Lightning Works
The Lightning Network creates a network of payment channels between Bitcoin users. Once a channel is open:
- Instant payments can be made between the parties
- Multiple payments can be sent back and forth
- Only the final balance is recorded on the blockchain
- Payments can be routed through multiple channels
This allows for nearly unlimited transactions with minimal blockchain footprint and near-zero fees.
Lightning Network Benefits
Instant Payments
Transactions are settled immediately, no need to wait for block confirmations.
Low Fees
Transaction fees are typically fractions of a cent, enabling micropayments.
Scalability
Millions of transactions per second are possible across the network.
Privacy
Individual payments within channels are not recorded on the public blockchain.