Lightning
Also: Lightning Network, LN
lightning · intermediate
A payment network layered on Bitcoin, using payment channels for near-instant, low-fee transfers settled on-chain when needed.
Lightning is a layer-2 payment network built on top of Bitcoin. Two parties open a channel by anchoring funds in a 2-of-2 multisig transaction on the base chain, then update their balance privately by exchanging signed transactions off-chain. Either party can close the channel at any time by publishing the latest state.
The trick that makes it a *network* rather than a collection of two-person tabs is HTLCs — Hash Time-Locked Contracts that let payments hop trustlessly across multiple channels. A payment from Alice to Eve via Bob, Carol, and Dave settles atomically: either every hop pays out or none of them do.
What you get: payments in seconds, fees in single-digit sats, scale measured in millions of payments per second across the whole network. What you trade away: on-chain finality, the convenience of "your wallet is always reachable," and a lot of operational complexity. Lightning works; it's not magic, and the trade-offs are real.
The whitepaper Lightning is built on (Poon & Dryja, 2016) cites the SegWit fix for transaction malleability as a prerequisite — which is why Lightning only became practical after SegWit's 2017 activation.