The Lightning Network leverages the security of the Bitcoin blockchain to enable faster (and cheaper) off-chain transactions – here’s how to access it.
Earlier today, crypto exchange Binance announced that it’s working to integrate the Bitcoin Lightning Network for deposits and withdrawals.
The exchange tweeted that some “eagle-eyed users” had spotted the new lightning nodes, confirming “yes – that’s us!”. The integration is still a work in progress, and it’s unclear when the platform will fully support Lightning Network payments.
The move comes a month after Binance halted BTC withdrawals twice due to network congestion.
So what is the Lightning Network?
In short, it’s a layer-2 scaling solution that leverages the security of the Bitcoin blockchain to enable faster (and cheaper) off-chain Bitcoin transactions.
Unlike newer, highly scalable PoS blockchains like Algorand, Cardano and Tezos, the Bitcoin network can be quite slow and expensive to use at times. As a point of comparison, Algorand supports 6000 transactions per second, while Bitcoin supports just seven. This is mainly because of the way the Bitcoin blockchain works.
As a proof-of-work chain, validating transactions relies on miners using intensive computer power to solve complex mathematical puzzles, which can take time. (The computer does the math, though, not the human being. You can read more about mining here.)
This doesn’t mean that Bitcoin is doomed to lag behind newer chains – it just means that it sometimes needs extra support to meet growing demand, namely from the Lightning Network.
At its core, the Lightning Network establishes a network of bidirectional payment channels between users. These payment channels allow users to conduct transactions privately and instantaneously, without the need for every transaction to be recorded on the main blockchain.
These channels can be thought of as private tunnels, or little shortcuts, between users. This approach significantly enhances Bitcoin’s scalability, allowing for near-instantaneous transactions with lower fees.
How can I access the Lightning Network?
The Lightning Network is still evolving, and not all merchants or service providers accept Lightning payments yet. Binance is working on it, but there are lots of other Lightning-enabled wallets you can use, including: Zap, BlueWallet, Phoenix Wallet, Electrum, Eclair Wallet, Muun Bitcoin Wallet, Wallet of Satoshi and Breez Wallet.
Here’s a step-by-step guide to accessing the Lightning Network:
1. Download and install a Bitcoin wallet that specifically mentions Lightning Network support. You can find these wallets on app stores or their respective websites.
2. Follow the instructions provided by the wallet app to set up your account. This usually involves creating a new wallet, securing it with a strong password, and backing up your wallet recovery phrase (which is essential for wallet recovery in case of device loss).
3. Once your wallet is set up, you’ll need to add some Bitcoin to it. You can do this by purchasing from a cryptocurrency exchange or receiving it from someone else. (Make sure you send the Bitcoin to your Lightning-enabled wallet address.)
4. With Bitcoin in your Lightning-enabled wallet, you can now open a payment channel on the Lightning Network. This step allows you to transact with other Lightning Network users. Most wallets provide an option to open a channel within their interface. Follow the instructions provided by your wallet to initiate the channel opening process.
5. Once your payment channel is successfully opened, you’re ready to start transacting on the Lightning Network. You can send Bitcoin to other Lightning Network users who have open channels with you, and they can send Bitcoin back to you. These transactions happen quickly, privately, and with lower fees compared to regular on-chain Bitcoin transactions.
And that’s it!
Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.