One of the biggest challenges in making Bitcoin a payment method that everyone can use in everyday life is the transfer and approval process. The approximately 10-minute confirmation time for Bitcoin blocks and the limited number of transactions within a block prevent Bitcoin from being used as a fast and effective payment method by the masses.
Since Bitcoin and blockchain technology are dynamic and innovative, new solutions and developments emerge every day. The open-source nature of Bitcoin allows everyone to access the code and make new developments, enabling volunteer developers and Bitcoin supporters to propose various solutions for Bitcoin to be used as a payment method.
Among the proposals for making Bitcoin a usable payment method in daily life, the Lightning Network stands out and has been widely accepted and adopted. In this article, you will find answers to questions such as: What is the Bitcoin Lightning Network? How does the Lightning Network work? And where is the Lightning Network used?
How Does the Lightning Network Work?
Since its inception, Bitcoin has proven its reliability by operating flawlessly in terms of decentralization and security standards. Therefore, it can be said that the golden rule of the community is to ensure that any developments on Bitcoin do not affect its decentralization or security.
The Lightning Network project is a protocol aimed at solving the speed issues in Bitcoin transfer transactions. To avoid interfering with the security and reliable structure of the Bitcoin blockchain, it operates on a separate blockchain that works parallel to the existing Bitcoin blockchain. The parallel blockchain of the Lightning Network allows transactions to be conducted much faster and more cheaply using Bitcoin.
Since the Lightning Network is a Bitcoin solution proposal, transactions are still carried out with Bitcoin. To make transactions on the Lightning Network, users need to send their Bitcoins to a Lightning Network wallet.
Transactions on the Lightning Network are conducted through specific payment channels. Two users can open a payment channel between themselves, or businesses like restaurants or cafes that receive regular payments can create their own payment channels that anyone can join.
When users with a Bitcoin balance on the Lightning Network want to pay for something like a coffee, they can join the payment channel of the business they are paying and complete the payment within seconds using their Bitcoin balance.
The reason these transactions are so fast, despite being conducted with Bitcoin, is that transfers on the Lightning Network are recorded to the Bitcoin blockchain with a delay. Normally, when a Bitcoin transaction occurs, the records of this transaction are written to the Bitcoin blockchain. However, transfers on the Lightning Network are not processed to the Bitcoin blockchain as long as the payment channel remains open. Once the transfers are completed, the payment channel is closed. When the channel is closed, the users’ most recent balances are recorded to the Bitcoin blockchain. Therefore, there is no need to record every single transaction to the Bitcoin blockchain until the payment channel is closed. Payments can be completed quickly and cheaply because only the final balances are updated, thus avoiding additional load on the Bitcoin blockchain.
