The Lightning Network is a Layer 2 scaling solution built on top of Bitcoin that enables fast, low-cost transactions by creating off-chain payment channels between users.
How It Works
Two users open a payment channel by locking Bitcoin in a multi-signature address on-chain. They can then conduct unlimited transactions between themselves off-chain, with near-instant settlement and negligible fees. When they're done, the final balance is settled on the Bitcoin blockchain.
Network Routing
You don't need a direct channel with everyone you want to pay. The Lightning Network routes payments through a network of interconnected channels, so you can pay anyone as long as a path of channels connects you.
Use Cases
Micropayments: Transactions of fractions of a cent become viable.
Point of Sale: Bitcoin payments at coffee shops and retailers with instant confirmation.
Cross-Border: Near-instant international transfers.
El Salvador: The Lightning Network played a central role in El Salvador's adoption of Bitcoin as legal tender.