What is the Lightning Network (LN)?
The Lightning Network: an off-chain or layer two solution that sits on top of a blockchain to facilitate fast transactions.
Immutability: unable to be changed
The LN works hand in hand with the Bitcoin protocol but does not actively interfere with it or change the protocol, thus maintaining the Bitcoin network’s immutability. Its main use in the bitcoin protocol is to enable rapid transactions among nodes and has been proposed as a solution to the bitcoin scalability problem.
Bitcoin and Scalability
Although bitcoin has many unique and positive properties, it does have one major drawback – scalability. Since many nodes are running the bitcoin network, the transaction process can take some time. The transactions that can be processed is relatively low – about 7 transactions per second, compare this to other established payment processing systems, for example, Visa – about 25,000 transactions per second, we can clearly see the problem.
The LN has been developed to speed up this transaction process. The LN is made up of a system of channels that allow users to move bitcoin between one another without needing the blockchain to verify the transaction. Basically, this means when you pay for something its not immediately settled. Instead, the settlement of the funds happens later.
When someone wants to receive a transaction, an invoice can be created and the person who wants to make the payment simply needs to scan the invoice to make the payment. QR codes can be used too as an easy representation of the invoice. The payment is then sent across the LN and confirmed. This transaction can then be easily added to the bitcoin network at a later date.
Examples of LN wallets
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