Have you ever used Bitcoin? If so, you may have noticed that transactions take ten minutes or more and fees can be high, depending on how busy the network is. Well don’t worry: there’s a solution in the works that makes these problems obsolete.
It’s called the Lightning Network and it’s the technology of the moment.
What is the Bitcoin Lightning Network?
The Lightning Network is a “second-layer solution” built on top of the Bitcoin network, meaning that it is built separately to the Bitcoin network but interacts with it. The bottom line is that it allows for faster payments, with lower fees. It’s run by a network of nodes that process payments, and transactions are commonly made using QR codes—instead of complex public keys.
It has its origins in musings by Satoshi Nakamoto, the pseudonymous creator of Bitcoin, but was formalized by researchers Joseph Poon and Thaddeus Dryja who published a whitepaper for the Lightning Network on January 14, 2016. In it, they argued a network of micropayment channels could fix the scalability issues of the Bitcoin network rather than changing the Bitcoin network itself to allow more transactions. The scalability challenge became apparent at the end of 2017 when millions of people jumped on the Bitcoin bandwagon and it struggled to cope with the number of transactions.
Lightning Labs, a blockchain engineering lab, helped to launch a beta version of the Lightning Network in March, 2018, alongside a host of individuals, and other companies including ACINQ and Blockstream. It was funded via a $2.5 million seed investment round, which included notable investor Twitter CEO Jack Dorsey (who has recently been getting more involved.) The Lightning Network was the first attempt at a second-layer solution but others followed.
The Network faced its first major hijack on March 20, 2018 when a distributed denial of service attack took down around 200 Lightning nodes. This was about 20% of the network at the time and the network struggled to process any transactions. After preventative measures were put in place, it has since reach a total of 7,000 nodes.
There are other similar projects out there. Blockstream has created its own implementation of the Lightning Network called c-Lightning which is built in a the C programming language, familiar to most developers. Litecoin has its own version, too—the Litecoin Lightning Network—which is small compared to the Bitcoin version, but is slowly growing.
How does it work?
The Lightning Network speeds up transactions, while reducing costs, by skirting the main Bitcoin blockchain. It is an unstructured network set up around it.
Channels are the ad hoc, peer-to-peer connections through which payments are made. Any number of payments can be sent in a channel.
The network is maintained by nodes that route payments. Nodes are run by everyday people—or corporations—running a program on their desktops, laptops or Raspberry Pis. This keeps it decentralized.
To start using the Lightning Network, any amount of Bitcoin needs to be locked up in a payments channel. Then, it can be spent across the Lightning Network, until the channel is closed.
When someone wants to receive a transaction, they create what’s known as an invoice. These are a long alphanumeric string of digits—which is often represented using QR codes. The person who wants to make the payment simply needs to scan this invoice with their Lightning Wallet and confirm (by providing a digital signature) that they want to make the payment.
When a payment is made, the confirmation is sent across the network to the person who originally made the request. This is known as a peer-to-peer network and means the processing of payments is not reliant on any one party. This typically happens in just a few seconds—hence the name Lightning .
Since payments are not made on the Bitcoin blockchain, they are not subject to long wait times and high fees. This means that much smaller payments, or micropayments, can be made for as little as one satoshi (one hundred millionth of a Bitcoin). This makes it more suitable for everyday transactions—while larger transactions can be made on the Bitcoin network.
Once someone has finished using the Lightning Network, they can close their channel and exit the network. This means they can use their Bitcoin again on the standard Bitcoin network.
For a more complex, technical introduction to the Lightning Network, check out Lightning Labs CEO Elizabeth Stark’s guide on Coincenter here.
How to connect to the Bitcoin Lightning Network
You can connect to the Lightning Network either by running a node or by using a Lightning wallet. Here are our top picks:
Bitcoin Lightning Wallet on Android
If you don’t want the full-node experience, you can download the Bitcoin Lightning Wallet app on your Android phone, which sorts everything out in the background and lets you connect to the Lightning Network. With this, you can open a Lightning channel and start making transactions to other users. It’s also “non-custodial,” meaning you look after your own keys—keeping your Bitcoin in your hands. (We tried it out by paying for a taxi ride.)
Blue Wallet on iOS and Android
If you want to use the Lightning Network but don’t want to look after your own funds, Blue Wallet is a custodial service that runs a node for you. It allows you to send and receive Lightning payments, but doesn’t let you withdraw your Bitcoin from the Lightning Network.
It also has a “Lapps” marketplace. Lapps is a portmanteau for “Lightning apps” and are apps that use the Lightning Network, the way decentralized applications (or “dapps”) run on regular blockchains. So far, there are only a few Lapps, such as Bitrefill for paying phone bills and ZigZag for exchanging cryptocurrencies. As Lightning picks up steam, expect the number of Lapps to grow, too.
To get the full Lightning Network experience, it’s worth running a full node. Sound complicated? It isn’t, actually. The folks at Casa have put everything you need in one box, so all you have to do is plug the Casa Node into itself, weirdly enough, and you’re up and running.
So what does this mean? Well for a start you’re now supporting the Bitcoin network and the Lightning Network by checking that transactions are legitimate. It also means you can connect it to your computer and make transactions from your own node. This literally makes you your own bank and you are the only person owning and controlling your funds. Scary, huh?
Eclair Lightning Node
If you’re feeling ambitious, you could set up a full Lightning Node. This takes a lot more computer know-how to run. It means downloading Eclair onto your computer—or a homemade Raspberry Pi—and running it. You are then routing transactions on the network and can make your own transactions.
Eclair also offers a mobile version for Android users called Eclair Mobile. This is a stripped-down Lightning node, which means you stay in control of your Bitcoin. You can connect it to your own Eclair Lightning Node if you’re running one. There’s only one catch: you can’t receive payments to it. Eclair explains why in this blog post. Tl;dr it’s safer and easier for them.
Once you’ve set up your own node, what next? Are you stuck with using a desktop app? Lightning Joule is a browser extension that lets you connect your Lightning Node to your browser so that you can easily make payments within Chrome, Firefox, Opera and Brave. It’s a convenient hack.
What can you do with the Bitcoin Lightning Network?
For a start, you can make payments to anyone else who has a Lightning wallet set up. But there’s more to the Lightning Network than just that. As it is a digital currency, it is easily integrated into websites without the need for third parties to get involved. Which means you can use it for just about anything online. And a number of companies have already done so.
Here are the best ones to try out:
Play a game of Lightning Snake
Everyone knows snake. You control a digital snake as it worms its way around a square getting ever longer as it eats small bits of food or dots on the screen. And you can play this game for free. But, if you’d like to spend some Bitcoin to play snake, Lightning Snake is for you. It’s very simple to play, you just send 5,000 satoshis ($0.20) to the address on its website and it lets you have a go. It even has a leaderboard.
Play a game of Lightning Chess
The idea for Koala Studio’s first Lapp, Lightning Chess, was conceived in a fireside chat between the Koala team and Jack Mallers, an avid chess player. It is like normal chess but has several extra features that you can use by making Lightning Network payments. These include extending timers, undoing moves and making bets on the outcome of the game. It’s a good example of how easily value can be embedded in an online app using cryptocurrency.
Get some satoshis with a Lightning Faucet
You can get some more Bitcoin. Faucets have long been a way to distribute small amounts of Bitcoin and other cryptocurrencies and it’s no different with the Lightning Network. This Lightning Faucet lets you claim 200 satoshis per day, which is just under $0.01. Got to start somewhere though.
Buy a Domino’s pizza
You hungry? Wait, before you reach for your debit card, why don’t you try ordering your pizza with the Lightning Network. That’s right, Lightning Pizza will order a Domino’s pizza on your behalf once you’ve paid them in Bitcoin. But only if you’re in the U.S. though.
Tip people in Satoshis on Twitter
Do you wish social media was more rewarding? Well now it is. You can tip other people—and they can tip you—in Bitcoin using the Lightning Network. Simply integrate Tippin.me and it puts a little lightning symbol on every tweet. You will need your own wallet to send tips (see above). All the cool kids are doing it, like Jack Dorsey, cofounder of Twitter.
How big is the Bitcoin Lightning Network?
It’s hard to grasp something that involves thousands of little parts, making millions of interactions with each other. It’s a bit like trying to picture everything going on in your brain. So, to make this a bit easier, we have used a number of visual diagrams. This is what the Lightning Network looks like from above.
A great resource for Lightning Network data is 1ML, a search and analysis engine. It provides data on which stores accept Lightning payments and information about current nodes. But it also features a spectacular visualization of the Lightning Network, showing all the nodes and how they are connected to one another. Check it out below.
For the more topologically minded of you, here is a map showing the locations of many of the Lightning Network nodes and how they are connected. You can see that there are three main areas where they are concentrated but that some exist in the far flung reaches of the world. Expect this map to become much more cluttered as time goes on.
If that wasn’t trippy enough, here’s a 3D view of the Lightning Network that you can explore here. And if you want to dive even deeper inside the network, you can don VR glasses and get the full experience.
This visualization makes the Lightning Network look like some kind of futuristic planet. This is the view from one person’s node. The larger the areas, the more Bitcoin in the Lightning channels. Interestingly, the large blue area on the right is called “DeutscheTestnetBank,” whoever that might be.
For more resources on the Lightning Network, check out Jameson Lopp’s resources page here.
1- Do not invest in every ICO – most of them are a scam.
2- Crypto is a heavily manipulated commodity and the price can change at any moment.
3- The creation cost of a coin represents the “wholesale” price – It is always better to buy when the price is close to the creation cost.
4- Crypto has a natural cash flow that dictates the selling pressure. Like, 1800 bitcoins are mine each day so 1800 bitcoin must be bought at the current price (“means market needs new $18 millions of investment every day if the price is $10,000 to maintain the current price“).
5- Patience and timing are key to making a profit:
Buy, when the price is close to the creation cost.
Sell, when the price is way high off the creation cost.