What is Lightning?

what is lightning

What is Lightning?

Lightning Network is often in the news and many Bitcoin proponents are very exiting about it. What is Lightning Network? On this page we will give a short but complete description:

The Lightning Network
The Lightning Network is a network of payment channels
Features of Lightning
Hardware for the Lightning Network

The Lightning Network

The Lightning Network is a payment system build on top of Bitcoin using payment channels. A payment channel comes to existence when a Bitcoin transaction is created between two parties but not broadcasted to the network yet.

Simple smart contracts using multisig and time lock verify enable the users to update the balance in the payment channel between each other. This can be done an unlimited amount of times without the need to use the blockchain and thus without a miner fee.

When you start to use Lightning you have to make an onchain transaction to connect to the network. This can be done within the Lightning wallet. Then you can make Lightning transactions untill the funds in your channel are finished. You can top up funds in an open channel by using a Lightning provider.

The Lightning Network is a network of payment channels

All Lightning channels in the network can be connected. A payment can find a route through multiple channels and every node it passes can charge a tiny fee, so you can make money with your Lightning node.

Lightning payments use onion routing and nodes have to play by the rules to be enforced by the smart contracts. This means that routing nodes can’t censor transactions or leak private information.

The features of Lightning

Transactions don’t have to be stored on every node in the network and kept forever as with onchain transactions. Only final settlement have to be done onchain thus a huge capacity can be reached with minimal resources. This makes Lightning extremely cheap, fast and scalable. On top of that it is private too.