The Future of Bitcoin

The Lightning Network: paying in bitcoin quickly, with low fees

The Bitcoin Journey

The Lightning Network: paying in bitcoin quickly, with low fees

The blockchain cannot do everything
Payment channels anchored to Bitcoin
A network of interconnected channels
Routing a payment without trusting intermediaries
Lightning node, Lightning wallet: what this means
Concrete use cases: what Lightning finally makes possible
Main Lightning implementations
Lightning as part of Bitcoin’s evolution

Now that you are familiar with the basics of the Bitcoin protocol, we can introduce the main payment network built on top of Bitcoin: the Lightning Network (often abbreviated as "LN"). Its goal is simple: enable BTC payments with near-instant finality, without congesting the blockchain, and with generally very low fees.

The blockchain cannot do everything

The Bitcoin blockchain is designed to be verifiable by as many people as possible, without permission and without trust. This requirement implies structural limits: the blockchain cannot process an unlimited number of transactions, because blocks must remain reasonable in size to download, store, and verify by independent nodes, without requiring expensive hardware. This trade-off is often summarized by the trilemma: decentralization, security, scalability. A blockchain-based system cannot maximize all three properties at the same time. Bitcoin prioritizes decentralization and security, which naturally limits the possible onchain transaction throughput.

On Bitcoin, developers have made deliberate choices to favor these properties. On the one hand, the block size limit of 1 MB and the average time of 10 minutes between blocks make it possible to run a Bitcoin node at low cost, which supports network decentralization. On the other hand, block production through proof of work makes any attempt at fraud extremely costly, while also making verification by nodes easier and strengthening the overall security of the protocol.

These choices nevertheless introduce an important constraint: the number of transactions that can be included in each block is limited. This corresponds to only a few transactions per second. This figure is negligible compared to the capacities of centralized payment systems such as VISA (which has a theoretical maximum capacity of around 65,000 transactions per second), but this limitation is the price to pay to enable censorship-resistant transactions without trusted third parties.

Concretely, this means two very important things for the daily use of Bitcoin:

when demand for block space increases, onchain fees can rise very high;
onchain payments require confirmations, which is not always suitable for everyday purchases.

The Lightning Network is precisely a response to these issues. The idea behind Lightning follows a layered approach: Bitcoin remains the base layer (the settlement layer, robust and highly secure), while Lightning acts as a fast payment layer on top.

Payment channels anchored to Bitcoin

Lightning relies on bidirectional payment channels. A channel is a technical relationship between two participants that allows them to exchange sats offchain, meaning without recording every payment on the blockchain.

From Bitcoin’s (onchain) perspective, opening a channel means locking funds in a special transaction. This can be seen as an escrow: the funds are locked in such a way that only a valid channel closure can redistribute them.

From Lightning’s perspective, this same mechanism becomes a channel in which both parties can update the distribution state of the sats as many times as they want, almost instantly, and without having to record each payment on the main blockchain.

The mechanism therefore works as follows:

opening and closing a Lightning channel are Bitcoin transactions (and thus published onchain);
payments between opening and closing are offchain updates, which are not visible on the main blockchain.

As a result, two people who share a Lightning channel can make a very large number of payments without performing an onchain transaction each time. Here we see the scalability logic again: the blockchain is reserved for rare and important operations (opening and closing channels, i.e., final settlement), while the many small intermediate payments are moved to a more efficient layer.

A network of interconnected channels

Lightning is not just a collection of isolated channels. It is a network: thousands of nodes are connected to each other through channels, forming a graph of connections.

Thanks to this network, you can pay a recipient even if you do not have a direct channel with them, as long as there is a path of channels that allows the payment to be routed. The payment then passes through several intermediate nodes, hop by hop.

This is where an important Lightning concept appears: liquidity. The capacity of a channel corresponds to the total amount of funds locked in that channel, and liquidity refers to how those funds are distributed between the two sides of the channel, and therefore the direction in which sats can flow. In other words, a channel can have a large capacity while being unusable in a given direction if the liquidity is on the wrong side. Successful payments therefore depend not only on the existence of a path, but also on the available liquidity along the entire path.

Routing a payment without trusting intermediaries

Lightning was designed to allow payments through intermediaries without trusting them. To achieve this, the protocol uses smart contracts called HTLCs (Hashed Time-Locked Contracts). Without going into all the details, the general mechanism is as follows:

the payment is conditioned on the revelation of a secret (a preimage);
if the final recipient reveals this secret, they receive the funds, and intermediaries can in turn claim what they are owed;
if the payment fails, the time locks expire and everyone recovers their funds.

This design provides an essential property: the payment is atomic. Either it succeeds entirely, or it fails without intermediate loss.

Finally, Lightning includes a penalty mechanism: if one of the participants tries to cheat by publishing an old channel state (which no longer reflects reality), the other can punish them and recover all the funds. This rule strongly incentivizes honest behavior, even in adversarial environments.

Lightning node, Lightning wallet: what this means

On Bitcoin onchain, a wallet is software that manages keys and constructs transactions. On Lightning, the situation is more ambiguous, because true non-custodial usage relies on a Lightning node (even if that node is hidden behind a simple interface).

In practice, there are two main categories of applications for using Lightning:

Custodial services: the application shows you a balance, but the funds are controlled by a service provider. Your balance is an accounting entry in their system, similar to an exchange;
Non-custodial solutions: you truly control the keys and the ability to recover your funds. This can be an application that embeds a node with minimal management, simplifying the user experience (for example Phoenix, Zeus...), or a full Lightning node that you manage entirely yourself.

PhoenixInstalling and using Phoenix Wallet

Zeus EmbeddedHow to use the Lightning Zeus Embedded wallet

There are also today self-custodial wallets capable of supporting Lightning payments indirectly, by relying on atomic swaps triggered on demand for each incoming or outgoing payment (for example Bull Bitcoin Wallet, Aqua…). These wallets generally use the Liquid sidechain as their settlement layer (we will see what this corresponds to in the next chapter).

Bull Bitcoin WalletFind out how to use the Wallet Bull Bitcoin

AquaBitcoin, Lightning and Liquid in a single wallet

Concrete use cases: what Lightning finally makes possible

Lightning unlocks a range of use cases that were previously impractical or even impossible with onchain Bitcoin alone.

Everyday payments (online and in person)

For checkout payments or online purchases, Lightning enables near-instant finality with generally low fees. This makes bitcoin usable for small amounts, even when the main blockchain is congested.

Micropayments and streaming money

The ability to send very small amounts opens up new economic models: pay-per-use, pay-per-minute, recurring donations, tips... This is the idea of "streaming money": paying as you consume a piece of content or a service, rather than through a flat subscription.

Content creators, podcasts, and donations

Lightning is often used for micro-donations or reward mechanisms. Applications like Fountain or Rumble illustrate this logic well: payments become granular and native to the experience, instead of being a heavy, occasional action. We have also integrated this logic into Plan ₿ Academy, since you can easily send small donations to your favorite instructors to thank them.

Games and digital economies

Video games and digital environments naturally lend themselves to microtransactions: small stakes, rewards, virtual items... Introducing a minimal monetary incentive can also increase the cost of spam and certain abuses (bots), while remaining accessible.

Main Lightning implementations

As with Bitcoin, Lightning is a protocol, not a single piece of software. Several implementations coexist and remain interoperable thanks to shared specifications (the BOLTs):

LND (Lightning Labs);
Core Lightning (Blockstream);
Éclair (ACINQ);
LDK (Spiral/Block);
etc.

Lightning as part of Bitcoin’s evolution

Lightning does not replace the Bitcoin blockchain: it complements it. The blockchain remains the final settlement layer, slow but extremely robust. Lightning is the fast payment layer, designed for frequent use and small amounts.

In 2025, Lightning is more accessible than in its early days, thanks to wallets and services that hide part of the complexity. However, it still involves trade-offs: liquidity, onchain costs for channels, and sometimes compromises between simplicity, sovereignty, and privacy.

If you want to understand Lightning in depth (channels, liquidity, routing, risk management), I recommend the complete theoretical course LNP 201 by Fanis Michalakis:

Lightning Network Theory

Intermediate

4.8(151)

Discover the Lightning Network from a technical perspective

4.8(151)

Lightning Network Theory

Discover the Lightning Network from a technical perspective

And if you want to embark on the adventure of running your own Lightning node, we also offer the practical course LNP 202, specifically dedicated to this topic:

Set up Your First Lightning Node

Intermediate

4.8(52)

Understand, install, configure, and use a Lightning node

4.8(52)

Set up Your First Lightning Node

Understand, install, configure, and use a Lightning node

Quiz

btc1016.1

1/5

Why can a Lightning channel be unusable in one direction?