What Is the Lightning Network?

Last Modified:
March 26, 2024

The Lightning Network is a Layer 2 network developed to speed up transactions on the Bitcoin blockchain.

One of Bitcoin’s biggest limitations is the low number of transactions it can handle per minute and the. Bitcoin uses a Proof-of-Work consensus mechanism, which, although very secure, can only process 7 transactions per second (TPS) and requires a lot of energy to do so. When many users try to use the network at the same time, the blockchain becomes congested. Users will either have to wait a long time for their transactions to be processed or pay higher fees to have them prioritized. For these reasons, Bitcoin is too inefficient and impractical to be used as a digital currency for everyday payments.

To solve these issues and keep the network from becoming overloaded, developers needed to build a Layer 2 solution to scale it. An example of such is the Lightning Network, which allows users to send and receive funds through payment channels outside the main Bitcoin network with no minimum transaction value required. 

Image source: Mariblock.com

In contrast with Bitcoin’s speed of 7 TPS, the Lighting Network has a TPS of over 1 million. It allows users to make payments of any size — even micropayments — as often as they want at a fraction of the cost. That makes it useful for daily transactions like ordering online, paying bills, shopping at the grocery, buying fast food, booking flights and hotel rooms, sending remittances, and even buying a cup of coffee. Companies using the network include McDonalds, Wallmart, Travala, Bitpay, CashApp, and hundreds of thousands more.

By addressing the key issues of speed and efficiency, the Lightning Network makes Bitcoin more practical for everyday use and brings us one step closer to widespread crypto adoption.