1 = $ 0000.00 | € 0000.00 | £ 0000.00 | Trade Bitcoin Here!

What is the Lightning Network, what is it for and how does it work?

What is the Lightning Network, what is it for and how does it work?

Lightning Network. Speed ​​and scalability are two points that, naturally, become essential in the world of cryptocurrencies. Specially for users who are in the Bitcoin network. Today, we are going to talk about a feature that is very important for this movement: the Lightning Network.

When it comes to Blockchain limitations, one is more prevalent than the others. Regarding its ability to perform transactions per second, there are a number of discussions and subjects that propose at looking for alternatives to deal with this issue, so Lightning Network.

The fact is that Blockchain and Bitcoin have gained ground in the world of cryptocurrencies. Now they are highly valued for providing great security measures for their users as well as providing a decentralization scenario.

Nonetheless, the years are passing by and the question of its slow transaction processing speed is strongly increasingly in this context.

Since making drastic changes is out of the question and since Bitcoin’s network has been up and running for over 10 years and working well, the solution is to look for alternatives like the Lightning Network. Let’s talk more about the topic in this post. Keep following!

In the following article, you will know more about:


  1. What is the Lightning Network?
  2. Example of its operation
  3. How does the Lightning Network works?
  4. Preparation of a multi-signature wallet
  5. Realization of the transactions
  6. Finishing the transactions
  7. What are the advantages of using the Lightning Network?
  8. Almost Instant Transactions
  9. Accessibility to micropayment processing
  10. Bitcoin Blockchain congestion reduction



Lightning Network (LN) is a powerful tool that provides support for Bitcoin transactions. The fact is, in the scenario we mentioned above, where the speed to put transactions on the Blockchain network queue has become a bottleneck. This was making small transactions at very low values can greatly increase the transaction fee, while congesting your Blockchain.

Therefore, to perform these microtransactions, there is the Lightning Network, which is nothing more than a network that does this (processing) work outside the Blockchain network, but with the benefit of taking advantage of Bitcoin’s network security.

The idea of LN is to bring the possibility of opening trading channels with more speed and less cost.


To understand how well this solution fits when small transactions are required between two users, we have prepared an example: Let’s assume that a pizzeria accepts payment in Bitcoins and, then, decided that we will place an order and pay the pizzas with the cryptocurrency.

As pizza payment will be nothing out of the ordinary (it is a microtransaction). We can open a channel on the LN network to pay for every pizza we order throughout the week. Thus, each payment will be sent from our user account to the pizzeria account, in other words, from one wallet to another.

When both parties (the pizzeria and the buyer) decide that this account is closed, we close this channel on LN and process the final amount on Blockchain. Easy, right?



Now that you have a better understanding of what the Lightning Network is and know its usefulness. Let’s go a little deeper into the details of its operation. To do this, we have prepared a small walkthrough so that you can visualize how this process works. See below:



First, we have entered a preparation phase, where the two users who want to use the Lightning Network to conduct their transactions create a multi-signature wallet.

This wallet is very similar to normal cryptocurrency wallets. The only difference is that they need more than one signature to complete a transaction. In other words, both parties must validate each transaction made.

The idea is that this wallet will be used to store the Bitcoins that are downloaded. Your address is saved in the Cryptocurrency Blockchain network, preparing the payment channel.


Once this wallet is created, the two proprietary parties (in this case the two users) can carry out their transactions without having to “warn” the Blockchain network that they are going on.

In practice, with each transaction that is performed, the authorization of both parties occurs, registering in the Lightning Network system. This process is done almost instantaneously, along with the security Blockchain offers for the Bitcoin network.


When transactions are finalized, that is, when the wallet owners at LN decide that the account is over, this channel can be closed. After that is done, the Blockchain network records the final balance.

One of the interesting points that the Lightning Network offers is that you don’t necessarily have to create a direct channel on the network to do this kind of operation.

Be aware that you can send payments through channels of people that users are already connected with. Therefore, in this case, the network finds the shortest route and creates this path to optimize this process.

It is important to note that all this is possible only because Blockchain provides a very safe environment. And LN was created to operate only on microtransactions that, by their very nature, carry a much lower risk. For larger transactions, it is not recommended to use this method.


To conclude the post, we will present some of the advantages of the Lightning Network. Let’s assume that you already know how it works to highlight some of its features that show why this tool is so vital.


The first advantage we have listed is something we talked about a lot over the course of this post. So it’s quite obvious: making transactions between cryptocurrencies, especially Bitcoin ones, virtually instantaneous. Do you remember that we talked about the scalability challenge in the intro? That’s it!

LN is here to help with this problem, making this bottleneck much smaller than it was before. Just take the example we provided in the previous topics. Imagine if you had to wait for a very long time on the Bitcoin network to process the payment of a pizza. It would probably be cold by the time its authorization was confirmed!

So, we must reinforce here that with the Lightning Network it is possible to initiate and execute  transactions much faster so that they happen almost immediately.


Another advantage is that with LN the possibility to make micropayments is much more real than before, eliminating any existing barriers to such transactions with Bitcoin and other cryptocurrencies.

It may seem like it’s just a small detail, but it brings much more accessibility. Encouraging new users to join the Bitcoin network. After all, the ease of the Lightning Network reinforces the idea that adopting cryptocurrencies as a form of payment is not at all difficult.

Whether you like it or not, it helps a lot in publicizing this market, as well as helping to bring more people to the network. And this makes them understand better what the crypto-economy movement is all abpout.

We know that when people join this world. They are taking a step towards becoming even more empowered and free about controlling their money.


Finally, a technical advantage of the Lightning Network that contributes a lot to the operation of Bitcoin’s network, as well as the good use of its Blockchain: the reduction of network congestion.

When the Bitcoin came into existence, there were not many issues related to too many transactions in its processing queue. Today, this scenario has changed, bringing this issue as a major bottleneck that needs to be addressed.

It is no wonder that some Fork processes and creation of new cryptocurrencies have already taken place with the intention of improving transaction processing speed and network decongestion. Therefore, there have been strong changes over the last 10 years of Bitcoin and cryptocurrencies.

LN plays an important role in this regard, as it brings the ability to process small transactions outside of Bitcoin’s Blockchain. This is providing a “relief” for the network itself, which may prioritize the processing of larger transactions and become less congested than it usually is.

We hope that after this article, you will have a better idea of what the Lightning Network is, how it works, and what benefits and advancements its network provides to the world of cryptocurrencies. So be sure to continue studying!

Did you like the post? What do you think, then, of continuing to delve into the subject? We recommend that you now know the five Blockchain applications that go far beyond Bitcoin!


100% SAFE! We do not share your email with third parties. We do not send SPAM.

Share this article:

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Close Menu