What is the Lightning Network?
The Lightning Network is a layer-2 protocol built on top of the Bitcoin blockchain designed to facilitate faster and cheaper transactions. It was developed to address Bitcoin's scalability issues by enabling off-chain transactions through payment channels. These channels allow two participants to conduct multiple transactions without recording each one on the Bitcoin blockchain, thereby reducing congestion and transaction fees.
The protocol operates through a series of payment channels where participants can lock a certain amount of Bitcoin. Transactions are then conducted off-chain between these participants and are only recorded on the main blockchain when the channel is closed. This method significantly increases the transaction speed and lowers the cost, making microtransactions feasible.
A key advantage of the Lightning Network is its ability to handle a high volume of transactions per second (TPS), far exceeding Bitcoin’s on-chain capabilities. This makes it ideal for applications that require fast and frequent transactions, such as gaming, social media tipping, and micropayments in retail settings.