All you need to know about Bitcoin Lightning Network

It’s been 12 years already since bitcoin was first created. Many believe bitcoin to be the future of the financial world. But the road to leading towards this future isn’t that easy. Because there is some issue standing in the way of this goal, and that is scalability.

Bitcoin was the first-ever digital currency to be created that serves efficient payments and cheaper and faster transactions. But the transaction power of this most popular cryptocurrency is only seven transactions per second. Yes, just 7!! 

This indicates that the main blockchain isn’t very scalable. If people try to do more transactions on the main blockchain, the time gets longer, and the price also gets increased. This was when the developers in 2015 came up with a solution called Bitcoin Lightning Network.

What is Bitcoin Lightning Network?

The bitcoin lightning network is like a second layer that reduces the congestion in the main blockchain by directing the users to reroute their transactions through an offline channel. This network works with its nodes and connects with the main blockchain through ‘channels’.

This system allows the users to make thousands of transactions away from the main channel. It will be regarded as a single transaction when published on the main blockchain. Since the lightning network allows to decongest the main channel, the transaction fee and time get significantly reduced. 

The science behind Bitcoin Lightning Network

The main idea behind the network is that small everyday transactions don’t need to be stored on the main blockchain. This is called the off-chain approach and helps to avoid the seven transaction limit. 

Let’s understand through an example. Let’s say Olivia has to pay Alice for her service. Creating a transaction on a blockchain for just a tiny service is overkill. So Olivia will set up a payment channel with Alice. To do this, both Olivia and Alice will deposit a certain amount of Bitcoins in a ledger called “multi-signature address”.  

Let’s say both deposited 5 BTC, each making the balance of the entire ledger 10 BTC. Now when Olivia decides to send Alice 1 BTC for her services, the transaction is completed. After which, Olivia would have 4 BTC while Alice would have 6 BTC. Olivia can keep making payments as long as she has a balance in the payment channel. 

A balance sheet is also generated along with the payment network and is signed by both parties through their private keys. Every time a transaction is made, the balance sheet is updated. Both parties can make thousands of transactions between them. Once they stop, the transaction will be published on the main blockchain. 

Why is the Bitcoin lightning network so important?

The apparent advantage of the lightning network is the transaction of micropayments without much delay and at a cheap rate. 

  • Lightning network significantly reduces the load on the main blockchain.
  • This network is very safe because the latest balance sheet is required to publish the transaction on the main blockchain.
  • You can also send bitcoin through intermediate nodes, which eliminates making a payment channel with everyone. 
  • The payment channels provided by this network are entirely private, so others cannot look at your individual transactions. 


As a decentralized network, the Bitcoin Lightning Network is the topmost priority of users for their micropayments. The adoption of this offline channel is on the rise as the number of active nodes on the network has increased by 8% in the last few months. The stats show that this second layer on Bitcoin will see massive growth in the future.  

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