Can you use Bitcoin to buy yourself a cuppa? The response was a resounding no – until the introduction of the Bitcoin Lightning Network.
BTC’s ever-increasing popularity and acceptance made it almost impossible to use it for microtransactions – small payments for everyday products. If Bitcoin is to be a peer-to-peer payment system internationally, it has to scale. High fees, a congested network, long confirmation times for transactions have led the Bitcoin community to search for new solutions. One of them is The Lightning Network.
What Exactly is the Bitcoin Lightning Network?
Bitcoin Lightning Network is a second-layer system that uses payment channels to instantly settle transactions without having to wait for block approvals. First suggested in 2015 by Joseph Poon and Thaddeus Dryje, it’s now being developed by Blockstream, Lightning Labs, ACINQ, and other community contributors for this popular cryptocurrency.
It’s no secret that bitcoin has a low seven transactions per second (TPS) transmission time. The number is nowhere near major global payment processors such as VISA (24,00 TPS), PayPal (193 TPS), alternative cryptocurrencies such as XRP (1500 TPS), or even Ethereum (ETH) (20 TPS).
The Bitcoin Lightning Network has no upper bound in relation to TPS, because a single channel in the network can handle more than 250 TPS, and there is no limit on how many channels the network can reach.
How Does the Lightning Network Function?
The Lightning Network essentially enables users to participate in numerous off-chain transactions with just the original and final wallet balances being inserted into the Bitcoin blockchain. Such an approach increases the network’s capacity substantially, and reduces transaction fees. In addition, it provides another layer of anonymity and user-protection.
The Lightning Network is not a panacea, however, and its opponents point out its shortcomings, including possible centralization and reduced security.
Using the Bitcoin Lightning Network
These are Bitcoin wallets funding the Bitcoin Lightning Network are:
- Lightning Peach (Android, iOS, Windows, Mac, Linux)
- Spark (Android, Windows, Mac, Linux)
- Tippin.me (Web)
- Bluewallet (Android and iOS)
- Breez (Android and iOS)
- Wallet of Satoshi (Android and iOS)
- Zap (iOS, Windows, Mac, Linux)
- Bitcoin Lightning Wallet (Android)
- Eclair (Android)
- Shango (Android and iOS)
- Casa Node (Hardware)
- Joule (Browser plugin for Chrome (incl. Brave), Firefox, Opera)
You’re going to have to finance this prior to using it. Just perform a simple BTC transaction to your new Lightning wallet.
You’ll have to start a Lightning channel when the wallet gets funded. Each wallet functions in various different ways, so be sure to obey its tutorial or walkthrough. Once you have opened the Lightning channel, you can send payments to other people. Bear in mind there’s a limit on how much money can be sent and received via the Lightning Network. At present it stands at BTC 0.168.
Remember that you won’t be able to accept Lightning payments with most wallets unless you fund them, open a channel and perform a payment. In addition, your channel will possibly need ample liquidity to accept payments of a particular scale. The only exception is the Tippin.me web wallet, which helps you to get tips on Twitter for good actions and tweets.