RawBTC on Nostr: Start here: https://river.com/learn/what-is-the-lightning-network/ TLDR; Bitcoin uses ...
Start here: https://river.com/learn/what-is-the-lightning-network/
TLDR; Bitcoin uses a blockchain to maintain a ledger of all transactions that have happened - new blocks are mined every ~10 minutes, and only a limited amount of transaction data can fit in each block. This means that as adoption grows, it’ll be harder for global commerce to happen on the base layer of the blockchain. Too many people will be competing for space in newly mined blocks, so fees will be expensive.
The lightning network is a payment layer on top of the bitcoin blockchain that increases the throughput of bitcoin payments that can be done and reduces transaction fees paid. 2 users establish a lighting “channel” via a special type of bitcoin transaction. After creating and funding the channel with some BTC liquidity, those 2 users can send payments back and forth trustlessly and nearly instantly without having to settle back onto the Bitcoin blockchain each time - but each channel participant has the ability to close the channel and settle on chain whenever they want. It’s kind of like going to the bar, ordering several drinks, and only paying one bar tab at the end of the night instead of paying for each drink separately.
Lightning channels connect two people to make payments with each other. However, Lightning nodes also route payments between channels to form the entire, connected lightning network. That means if Bob has a channel with Jill and Jill has a channel with Paul, then Bob can pay Paul by routing through Jill - even though Paul and Bob don’t have a direct channel between each other. It’s basically a giant network of connected channels where no one ever has to trust anyone else to make these off chain payments.
Lightning is a payment layer, and bitcoin is a settlement layer.
TLDR; Bitcoin uses a blockchain to maintain a ledger of all transactions that have happened - new blocks are mined every ~10 minutes, and only a limited amount of transaction data can fit in each block. This means that as adoption grows, it’ll be harder for global commerce to happen on the base layer of the blockchain. Too many people will be competing for space in newly mined blocks, so fees will be expensive.
The lightning network is a payment layer on top of the bitcoin blockchain that increases the throughput of bitcoin payments that can be done and reduces transaction fees paid. 2 users establish a lighting “channel” via a special type of bitcoin transaction. After creating and funding the channel with some BTC liquidity, those 2 users can send payments back and forth trustlessly and nearly instantly without having to settle back onto the Bitcoin blockchain each time - but each channel participant has the ability to close the channel and settle on chain whenever they want. It’s kind of like going to the bar, ordering several drinks, and only paying one bar tab at the end of the night instead of paying for each drink separately.
Lightning channels connect two people to make payments with each other. However, Lightning nodes also route payments between channels to form the entire, connected lightning network. That means if Bob has a channel with Jill and Jill has a channel with Paul, then Bob can pay Paul by routing through Jill - even though Paul and Bob don’t have a direct channel between each other. It’s basically a giant network of connected channels where no one ever has to trust anyone else to make these off chain payments.
Lightning is a payment layer, and bitcoin is a settlement layer.