What is Bitcoin Lightning Network? And How Does It Work?

The two major hitches that cripple the platforms handling transactions in fiat currencies are the slow transactions and the high transaction fees charged in the process. Bitcoin and cryptocurrencies in general were created to offer a solution to these problems.

However, anyone who is familiar with bitcoin transactions would know that the reverse is the case. In regards to the time it takes to process a single transaction, other payment systems that utilize conventional money like PayPal, Visa and MasterCard can process hundreds of transactions in split seconds.

Accordingly, the bitcoin system was expected to handle ten thousands of transactions in an equivalent amount of time. On the contrary, using bitcoin, it could take anytime from minutes to hours, worst case scenario, days for a single transaction to go through.

Now, when a bitcoin user initiates a transaction, the payment is verified and recorded on the blockchain database through a process called mining. Miners are paid a certain amount of fees charged to the initiator of the transaction as transaction fees. There is no fixed charge set for a transaction, rather it fluctuates with the volatility of the coin. Yet, the cost of transactions are so ridiculously high and the system is basically inefficient.

Let’s assume a user wants to pay for a box of pizza using bitcoins, putting into consideration the fact that it may take at least several minutes or hours for the system to process the payment and the fact that the cost of transaction may be higher than the actual price of the pizza, how functional and practical is the bitcoin system in the every day life of a regular individual? The Bitcoin Lightning Network was designed to address these problems.