How fast is the Bitcoin network? Currently, Bitcoin can only process between 2 -7 transactions per second. For context, Visa, the legacy payment network that powers your debit and credit cards you use for shopping, process up to 150 million transactions a day. In comparison, its network capacity is 24,000 transactions per second. How then can Bitcoin compete? The Lightning Network provides a challenger path.
In theory, the Lightning network could easily process transactions running in thousands or hundreds of thousands instantly, giving it a great use case in micropayment transactions, let’s say as small as four satoshis (sats).
Key concepts for using the Lightning Network:
Nodes – is software that connects to the Lightning Network to send and receive bitcoin from other nodes. The network is made up entirely of these nodes connecting to each other
Channels – users of the Lightning Network create payment channels so that they can transact with each other off-chain, which can later be settled (closed) on the mainchain (on-chain)
Invoices – are requests for payment on the Lightning Network, generated as QR codes. Invoices include the information necessary to complete a payment on the network, such as payment amount, which blockchain the invoice applies to, expiry date, payee pubkey, routing hints, and other information.
So how do you set up and use the Lightning network? There are three ways to this, starting from the simplest custodial option, and ranging to setting up your own Lightning Node.
1. Through a custodial lightning wallet, e.g. Bottlepay
2. Non-custodial Lightning wallets, e.g. Wallet of Satoshi, Breez, BLW, Eclair, Zap Tippin.me, Bitrefill, BitPay etc.
3. Setting up a full node
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