What exactly is the Lightning Network?

Unlike Bitcoin, which is a network on the blockchain, lightning is a network off it. This means that each transaction does not have to go through every node like a Bitcoin transaction does and instead lightning transactions move directly between nodes connected from person to person.

The Lightning network makes it possible to send multiple transactions per second, back and forth through payment channels without any problems. While a Bitcoin transaction can take several hours, a Lightning transaction is as fast as Swish.

Lightning is not completely independent of the Bitcoin blockchain but is supported as a second layer of the same security as the Bitcoin network. Thanks to this you can make almost direct transactions, which are free of charge, unlike B2C which has become very expensive over time.

How does the Bitcoin Lightning Network work?

You need two important functions for the lightning network to be functional:


  • Payment channels
  • Hashed Timelocked Contract

For payments to work, you first need payment channels. This allows transactions to take place without first having to publish the transaction on the blockchain. This speeds up the process and allows you to, for example, charge per minute for a service or make multiple transactions at the same time.

The next step in securing network lightning is something called Hashed Timelocked Contracts, a feature that allows payments to be made to anyone on the network while ensuring that payments are legitimate and not fraudulent. This ensures that transactions are actually authorised and leave within a certain time frame so that the money does not bounce back.

What are the advantages and disadvantages of the Lightning Network?


Fast payments

Paying with Lightning is lightning fast, unlike Bitcoin which can take up to several hours. An established channel between two people is almost as fast as an online data transfer.

All types of transactions

With lightning you can send large amounts but also extremely small amounts. For example, you can send several transactions per second with the minimum amount being 0.00000001 BTC.

No third party is involved

Since payments are made between two channels, a third party can never be involved. That way, no one else can ever take control of your funds.

Low fees

Transactions with the Bitcoin lightning network, unlike a regular transaction, have minimal fees, often ranging towards one Satoshi (0.00000001 BTC). This is equivalent to as much as one per cent of a penny.


Slow development

The integration of the lightning network has been very slow since its launch in 2018. The community around the bitcoin lightning network has grown, but not at the rate hoped for.

You must open a channel yourself

To use lightning, you need to open a channel yourself and this can be tricky for beginners. In addition, both users need to be available and connected for transactions to take place and therefore you cannot make a payment at any time.

Uncertainty of major transactions

Since the lightning network is designed to handle small to medium-sized transactions back and forth, large payments can be problematic. It is therefore recommended not to make larger payments than you are willing to lose.

Who created the Lightning Network?

The first time we saw a glimpse of a white paper explaining network lightning was in 2015. It was Joseph Poon and Thaddeus Dryja who described the integration for the first time and are still working with several other programmers via Lightning Labs, Blockstream and ACINQ.

These three companies are working on integrating the network in different languages:

  • Lightning Labs: It develops LND, which stands for "Lightning Network Daemon" and is written in Golang.
  • Blockstream: Here you work with the integration written in the C language.
  • ACINQ: Here you are responsible for the Scala implementation.