The Lightning Network: A Bitcoin Payment and Settlement System

May 8, 2019, by Interstein N.
As an off-chain payment protocol, the Lightning Network can handle Bitcoin transactions more efficiently than Bitcoin itself. Lightning is an

ideal choice for shopping sites that want to accept Bitcoin, so you may encounter it as a customer. Here’s what you should know about Lightning.

What Is Lightning?

The Lightning Network is a payment and settlement network that complements Bitcoin’s own mining network and blockchain. It is sometimes referred to as a “second-layer protocol” or an “off-chain protocol.” Both of these descriptions mean the same thing: the Lightning Network transfers Bitcoin, but it doesn’t rely on Bitcoin’s own network to do so.

As a result, Lightning is capable of performing Bitcoin transactions very quickly. Rather than waiting for Bitcoin miners to process transactions, the Lightning Network uses its own system of nodes. The operators of these nodes open payment channels and essentially keep track of Bitcoin transactions that have taken place on the Lightning Network.

The Lightning Network does have some limitations. Lightning was not truly useful until it accumulated a large number of nodes, and the capacity of any Lightning channel is limited by the balance that its operators have committed. Fortunately, these matters are no longer an issue: after a year of operation, the Lightning Network is thriving.

Lightning’s Impact

Lightning makes it very feasible for high-traffic sites to accept Bitcoin. Many merchants and vendors need to accept countless transactions in just seconds, and Bitcoin’s relatively slow transaction speed has limited its adoption. Fortunately, the Lightning Network allows Bitcoin to scale, meaning that it allows Bitcoin to handle as many transactions as a merchant needs.

It is also worth noting that Lightning wasn’t created exclusively for Bitcoin. Although Bitcoin is responsible for most Lightning activity, Lightning can also be used with other cryptocurrencies such as Litecoin. In fact, a payment processor called Coingate has recently adopted the Lightning Network with Litecoin, allowing thousands of merchants to instantly make use of the technology.

As a customer, you won’t need to consider most of the above concerns. However, you may encounter shopping websites that use Lightning in order to process your payment. In this case, you will need to use a Lightning-compatible wallet. Fortunately, most sites accept regular crypto payments as well, in which case you can use your Jubiter wallet to send your payment as usual.

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