Lightning: fast small payments

Lightning is a network built on top of Bitcoin for fast, small payments. Instead of putting every payment in a block, two people lock some bitcoin into a shared channel with one ordinary transaction, then pay each other back and forth as often as they like, in seconds. Only the opening and the final balance go on the chain.

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A normal payment, for comparisonLoading live figures…

A simple on-chain payment would pay

…

In dollars

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Average wait for a block

…the first confirmation

A Lightning payment usually settles in a few seconds, and its fee for small amounts is often a few satoshis.

See it on satoshis.watch →

How a channel works

1. Open. Two parties put bitcoin into a shared address with an on-chain transaction. Neither can take the money alone.
2. Pay. They swap signed updates saying how the balance is now split. Each update replaces the last; nothing goes on the chain.
3. Close. When they are done, the latest split is settled on the chain with one more transaction. If one side tries to cheat by closing with an old split, the other can claim the whole channel, as long as it, or a service watching for it, notices in time.

You don't need a channel with everyone you pay. A payment can hop across several channels run by other people, each passing it along for a tiny fee, without any of them being able to take it.

Still bitcoin?

Yes. The money in a channel is real bitcoin locked on the chain, and closing the channel returns it to ordinary addresses. Lightning is a different way of moving it, not a different coin.

Invoice or address?

Bitcoin address	Starts with 1, 3 or bc1. Can be paid any amount, on the chain.
Lightning invoice	A long code starting with lnbc, usually shown as a QR code. Asks for a set amount and expires after a while.
Lightning address	Looks like an email address, name@example.com. Your wallet uses it to fetch a fresh invoice.

Many wallets read all of these and choose the right way to pay. Paying an invoice needs a wallet that supports Lightning.

The trade-offs

• Good for small, frequent payments: tips, coffee, paying a friend across the world.
• To receive, a wallet generally has to be online, or rely on a service that is.
• Channels cap how much can move at once, so large payments usually go on the chain.
• The simplest Lightning wallets often hold the keys for you, with the same trade-off as an exchange; see on an exchange or in your own wallet.