How Does Lightning Work?
The Lightning Network enables instant Bitcoin payments by moving transactions off-chain. Here's how it works, explained simply.
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The Problem: Bitcoin's Scalability
Bitcoin transactions are slow and expensive. Each on-chain transaction requires:
- Waiting for block confirmations (10+ minutes)
- Paying transaction fees that can be several dollars
- Competing with other transactions for block space
The Solution: Payment Channels
Lightning solves this by creating payment channels between users. Think of it like opening a tab at a bar — you settle up at the end, but you can make many transactions in between.
[Diagram: Payment Channel Concept]
Key Concepts
Payment Channels
A payment channel is like a private ledger between two parties. They can send money back and forth instantly without touching the blockchain.
Multi-Hop Routing
You don't need a direct channel to everyone. Lightning can route payments through multiple channels, like connecting flights.
HTLCs (Hash Time-Locked Contracts)
These ensure payments are secure even when routed through strangers. The money only moves if the recipient can prove they received it.