Bitcoin was built to be an indestructible store-of-value that cannot be manipulated or taken from you, providing you store it safely.
Thanks to an innovation known as the Lightning Network, Bitcoin can also fulfil the potential of being digital money, an effective means to pay and make everyday transactions.
The Lightning Network
No. The Lightning Network is not Buzz Lightyear’s mobile network provider. Nor is it the name of Elon Musk’s latest space exploration venture. Put simply, the Lightning Network is a technology layer that sits on top of the Bitcoin network. And it allows businesses like ours to create services that make instant bitcoin transactions possible, which Bitcoin itself was never really designed to do.
The base Bitcoin network was created with security and finality in mind, not instant transactions. It can take 10 minutes or longer for a transaction on the Bitcoin network to be confirmed as final because each one gets put in a queue to be authorised by the network itself, in a complex process which takes time and energy.
People can pay to prioritise their place in the queue but it comes at a cost. As such, transactions on the base Bitcoin network work for those who can afford to wait a while for a payment to complete i.e. an online business. But for normal physical shops which require immediate payment, it is not a feasible payment method.
Driving value in the real-world
The Lightning Network solves the technological issue of making instant Bitcoin transactions. Importantly, it also solves a number of fundamental economic flaws that impact consumers and merchants daily. For example, consumers using the Lightning Network can transfer bitcoins immediately to businesses or one another, anywhere in the world, without any third-party. Additionally, businesses which can accept lightning bitcoin payments can facilitate digital transactions without incurring hefty processing fees from companies like Amex, Visa and Mastercard.
This is a game-changer. Consumers do not need to pay for sending money anywhere. And businesses get to keep the entire value of the goods they sell, which can subsequently drive better profitability or better value for customers. The reason for this comes down to how the Lightning Network is set-up, which you can read more about here.
Using the Lightning Network
Step 1: Download a wallet
If you want to use the Lightning Network you will need to download a Lightning Wallet. There are many available for desktop and mobile but we recommend one of the below. Lightning Wallets are similar to regular Bitcoin Wallets. Some even offer both options in one app. There are a number of different types but they generally fall into two broad categories:
- Non-custodial (You manage your funds but it could be tricker to use): Breez (Android/iOS) / Zap (desktop/iOS) / Eclair (Android) / Phoenix (Android)
- Custodial (less hassle but you will be trusting a third-party with your bitcoin): Wallet of Satoshi (Android/iOS) / Blue Wallet (Android/iOS)
Step 2: Funding your Lightning Wallet
Once you have chosen and installed your wallet you will need to fund it with Bitcoin. If you have Bitcoin stored on another wallet you can send some from it to your new Lightning Wallet address. If you need to buy Bitcoin, head over to our website to find a FastBitcoins merchant you can buy it from. FastBitcoins lets you buy bitcoin vouchers in physical shops using cash. And these vouchers can be redeemed in Lightning Wallets in seconds.
Step 3: Making Bitcoin payments with Lightning
Once your wallet is funded you will be able to spend your bitcoin to pay people and businesses that accept Lightning Payments. There are two ways that you can pay with Lightning. One is direct payment to another person, whereby they will create an invoice. You just have to copy and paste this into your wallet, confirm the amount payable and hit confirm on the payment. The second, more simple way is when this code is converted into a QR code that your Lightning Wallet can quickly scan.
The Lightning Network is an exciting new technology that can finally get the benefits of Bitcoin to be realised by businesses and consumers alike. Ultimately, its success depends on everyone knowing about it and having an easy way to use it. Our priority is developing insights and services that makes this possible, join us at FastBitcoins to start using it now.