Lightning Network

The Lightning Network is a layer built on top of Bitcoin that enables fast, low-cost transactions. It works by creating private payment channels between users. When two people want to use the Lightning Network, they open a channel by depositing bitcoin into a shared address using a regular Bitcoin transaction. Inside this channel, they can exchange funds instantly and repeatedly, with each transaction just updating their balances instead of broadcasting it to the public blockchain.

The network isn’t limited to people with direct channels—payments can be routed through several users if needed. Because transactions within the channel are off-chain, they’re nearly instant and have minimal fees. Only when the users are finished do they close the channel, and one transaction is recorded on the Bitcoin blockchain reflecting their final balances. This approach allows Bitcoin to process many more transactions efficiently and is seen as a key solution for scaling. The Lightning Network is still evolving, but it demonstrates how Bitcoin could be used for everyday, small payments in the future.