Lightning Network

The Lightning Network is a Layer 2 scaling solution built on top of Bitcoin. It enables near-instant, low-fee transactions by routing payments through a network of off-chain payment channels between users, settling the final balance on the Bitcoin blockchain only when a channel is closed.

How it works

1. Two parties open a payment channel by committing Bitcoin in a multi-signature on-chain transaction
2. They can then exchange unlimited payments off-chain, instantly and for near-zero fees
3. When they are done, the channel is closed and the final balances are settled on-chain

Payments can also be routed through third-party nodes — you don't need a direct channel with every recipient.

Key properties

• Instant — transactions confirm in milliseconds
• Low fees — fractions of a cent per transaction
• Scalable — millions of transactions per second theoretically possible
• Non-custodial — funds remain in self-custody throughout

Relevance to miners

Some mining pools and exchanges support Lightning Network for Bitcoin payouts, enabling faster withdrawals of small amounts that would otherwise be uneconomical due to on-chain fees.

See also

• Bitcoin
• Fee
• Blockchain