Introduction to the Lightning Network

Gustave
3 min readMay 5, 2020
Left : Paypal-like architecture — Right : Lightning Network architecture

1. What is the Lightning Network ?

The Lightning Network is a peer-to-peer payment protocol based on the Bitcoin network, allowing for instant and very low fees transactions (under one/tenth of a cent).

Imagine that you put a small amount of your savings « online » on the network, and that everyone does the same. The result is a network where all this money is interconnected and can move around instantaneously. That’s the Lightning Network.

In practice, using it is as simple as scanning a QR code or copy/pasting a url, both representing invoices.

Example :

2. What are the innovations ?

Thanks to its unique design, very different to Bitcoin’s, the lightning network has two main advantages regarding payments : time and fees. Transactions are instant and fees very low, independent of the amount transacted. These characteristics allow for a new kind of transactions that were not economically viable before : micro-payments. It is now possible to send a dollar or even fifty or twenty cents, « for free », instantly and in a peer-to-peer decentralized fashion. We could go as far as paying 0.001$.

If these types of transactions were theoretically possible before in a centralized way, they were not happening because of high infrastructural and payment processors costs. They were preventing the viability of small transactions over the traditional payment system.

That is why some merchants don’t accept credit cards for payments under X$, and that online payments under 1$ still don’t exist. Now a solution exists, and it has the advantage to be decentralized. We can think about many new use cases for small payments, particularly on internet.

3. Examples of new possibilities

Content monetization on internet can now happen more easily, and take place directly between the consumer and the creator without third-parties. Imagine a premium YouTube video costing five cents to every viewer, allowing the creator to be free of any polluting advertising and receive their money directly into their digital wallets as the content is viewed. These content creators would then have better flexibility to express themselves (their pay not being attached to advertisers), and could be remunerated directly by their audience in a fairer way.

Another use case would be to democratize readings of paid articles online, making them accessible to non-subscribed customers for a small amount (tens of cents). On their side, readers could have access to all online articles without the necessity to subscribe. On the other, online editors could attract more readers on their paid content and adapt the price of their articles (some of them more expensive than others, increasing prices with the number of articles read, and more).

Final thoughts

Overall, this innovative payment network opens the gate for completely new types of payments. As Lightning is still in its very early days, most applications remain to be discovered and implemented, and accessing the network can still be a hassle.

That’s why, together with my classmate Alessandro Tognola, we built LndX a platform to buy a few satoshis directly on Lightning in a few minutes. Don’t hesitate to visit if you want to enter the Lightning world!

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