About Bitcoin Lightning Network and Micropayment

Despite its 12-year history as a cryptocurrency, Bitcoin (BTC) is considered to be still in its infancy. While we’ve learned a lot about Bitcoin’s current life cycle, there’s still a lot to explore. We’ve seen this most popular cryptocurrency develop its own characteristics and develop many real-world use cases to serve areas in need. Please enter the Bitcoin Lightning network.

Over the past 12 years, we have also seen aspects of Bitcoin that have yet to improve. The biggest problem has always been scalability. Currently, on the Bitcoin blockchain, a block is born about every 10 minutes. While this speed is not bad, problems can arise if many people are using the network at the same time – transactions can take longer and can be expensive.

Fortunately, the problem has been recognized, and many developers are working on a solution. One of the outstanding solutions is to add the Bitcoin Lightning network.

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What is the Lightning Network ?

The Bitcoin Lightning Network is a layer 2 or off-blockchain solution to the scalability problem. That said, Lightning is a second layer built on top of the Bitcoin blockchain, with its own nodes and software that communicates with the main blockchain via micro-ledgers (or “channels”).

Built on top of current blockchains, while using smart contracts, the Lightning Network can speed up transactions and reduce associated fees. It is equivalent to having an exclusive highway for faster and cheaper BTC transactions. To maintain the security of these channels, the network uses Hash Time Lock Contracts (HTLCs) that allow users to set conditions that prevent fraud.

To help you better understand how Bitcoin’s Lightning network works, let’s use a real-world case study: Dave wants to send Bill Bitcoin using the Lightning network.

To create a channel, they all need to invest in BTC to fund it. Suppose both parties invest 6 BTC each. This means that the total balance of the channel is 12 BTC.

Once the passage is created, the highway is opened. Now, they can send as many transactions to each other as they want, as long as the transactions don’t exceed the invested balance. If Dave sends Bill 2 BTC, then Dave has a balance of 4 and Bill has a balance of 8. They can continue this at will, but once both parties decide to complete the transaction, the channel will be announced and the main chain will be updated.

Kind of like adding someone to your phone’s speed dial, which works best with the people and shops you’re dealing with on an ongoing basis.

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Importance of the Lightning Network

By creating a channel with someone, you can conduct thousands of transactions with them – all with fast speeds and lower costs.

The real importance of the Lightning Network is that it can make small transactions more efficient, and this is the problem that the BTC main blockchain has always faced. Imagine a scenario where the transaction fee is higher than the amount of the transaction itself. It could be disappointing and even turn people off Bitcoin as a whole.

The Bitcoin Lightning network can solve this problem. With your own highway, you can send even 1 satoshi without worrying about high fees. Compared to the main chain with a minimum transaction amount of around 0.0000055 BTC, we can easily see that the Lightning network can change the way people use BTC for small transactions.

If most of the current BTC users use the Lightning network, the congestion pressure on the main chain can be relieved, allowing them to conduct larger transactions, and those who use the main chain will no longer have to face high fees and long processing times.

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Lightning Network Use Cases

Now that you understand the far-reaching implications of the Bitcoin Lightning network, how exactly does it affect your daily life? To help you understand its importance, we have listed a few use cases for the Lightning Network for you:

  • A new payment model for content creators Now, with more efficient micropayments, all content creators can choose to get paid in Bitcoin at a lower cost and faster. Including creators such as anchors, artists, bloggers, etc.
  • Send and receive money with your friends and family Want to send and receive money instantly and privately? Try the Bitcoin Lightning Network to simplify your transaction process.
  • Donate to your favorite online personalities and organizations Want to show support in your own way? The Lightning Network is the way to go. Make micropayments almost instantly at no additional cost.

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Paxful’s Lightning Network Integration

Recently, Paxful integrated the Lightning network into the Paxful platform. You can try it out for yourself and trade in a flash. The operation method is as follows:

  1. First, head to your wallet
  2. Click the Lightning tab
  3. If you’re sending funds, click Send , paste the recipient’s invoice, and click Pay
  4. If you want to receive funds, click Receive to generate an invoice

It’s that simple. With this new feature, you can send and receive payments more efficiently. This is perfect for business owners looking to receive bitcoin payments. Head over to our Knowledge Base to learn more about the Lightning Network on Paxful.

Want to see a real-world example of the Lightning Network? Check out the Lightning Diary to see how Bri and Renata explored El Salvador using nothing but their Bitcoin wallet.

A year ago, the Lightning Network might have been just a wish. At the time, it was just a hope and an idea, not implemented on a large scale.

But today, our outlook is very different. Now that many platforms are integrating the Lightning Network, what was once a “fantasy” is now a reality – and all we have to do is wait for the rest of the world to follow this pace and start a revolution.

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