Lightning Network
The Bitcoin Lightning Network is a layer-2 solution built on top of the Bitcoin blockchain that enables faster and cheaper transactions by creating off-chain payment channels between users. Basically, instead of broadcasting a Bitcoin transaction to the public, you exchange pre-signed Bitcoin transactions with your peers that can be published to the blockchain at any time by either party. As it eliminates the requirement to record every single transaction in the blockchain, the Lightning Network is a way to scale Bitcoin.
The basic idea is simple, but understanding how it works in detail is very complex. This documentation won’t explain the Lightning Network in depth, but one essential fact deserves attention:
The Lightning Network is built on actual Bitcoin — no shady shitcoin involved!
Here’s a brief overview of its pros and cons:
Pros:
Fast
Cheap (for small transactions, costs scale with transaction value)
Better Privacy (the transactions are not visible to the public, only the final channel balance is)
Helps scaling bitcoin while preserving its decentralization
Cons:
Backups get way more complex
Liquidity management is very complex
Your node needs to be online to receive a lightning payment
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