How to use a Lightning Network?

How to use a Lightning Network?

Bitcoin is the king of cryptocurrencies, and there is no other cryptocurrency that comes close to the power it holds over the market. But despite this, there are some major flaws that follow Bitcoin, which should not be surprising, considering that it was created in 2009, and still operates the same way it used to. 

There are many different problems associated with Bitcoin, but the major ones are long transaction times, high transaction costs, and it’s also very energy intensive. But being hailed as the future of money, Bitcoin has a problem becoming the digital cash that it was envisioned as with these flaws surrounding it. But if there is a problem, there is a solution, and in this case, it comes in the form of Lightning Network. But what is Lightning Network exactly and how can we use it?

What is Lightning Network

Lighting Network is a layer-2 blockchain that operates on top of the original Bitcoin blockchain. It uses smart contracts to create off-blockchain payment methods between participants, which increases transaction speed, and funds are transferred within seconds. Lightning Network also creates a sort of web of channels, and because of this not everyone needs to be connected with each other. If two people have channels with one shared person, these two people can make transactions between each other, without the need of establishing channel connection between each other. 

Once users are done making transactions and they have finalized the funds on their wallet, they can close their channels and the final balance will appear on the main blockchain. What this means is that, blockchain only records opening and closing of these channels and thanks to that transactions happen quickly and there is no big waiting time. These types of transactions also bring some level of anonymity since every transaction on the main blockchain is recorded on public ledger. 

Since using Lightning Network is so easy and it does not require big time or resources, these transactions are also very cheap. For example, a transaction that has a fee of around $10 on main blockchain, can be transferred for not even a cent on Lightning Network. 

How to use Lightning Network

Now that we know what a lightning network is and what benefits it has, it’s time to learn how one can use it. There are multiple steps involved in using Lightning Network, but in general this is a simple process that is similar to other crypto transactions. 

Acquiring Lightning Wallet

The first step for using Lightning Network is acquiring a Lightning Network Wallet. There is a big selection of crypto wallets that support Lightning Network, with both custodial and non-custodial wallets available. Custodial wallets are wallets that are in control of third-party providers and they are in control of private keys. While non-custodial wallets are ones that are fully under your control, you are also the one responsible for keeping the wallet safe.

Simply think what are your needs and what type of wallet will be more beneficial for you. Once you have selected the one, the opening process should not be hard, as almost every wallet has a similar setup process. 

Deposit Funds

Once you have created your wallet, it’s time to add some funds to it. You can send Bitcoin from your personal wallet or from your exchange account to your Lightning Wallet, by entering the Lightning Wallet address when making a transaction and simply waiting for transactions to go through. We would recommend waiting for transactions to have few confirmations before making any transactions using Lightning Network, in order to be sure that nothing has gone wrong. 

Open a payment channel

Now comes time to open a payment channel. When you are using a Lightning Network to make a transaction or payment, you should open a transaction channel with the person who is going to receive these funds, or find a pathway to that person through mutual channels. After this, crypto will be deposited into the payment channel and these cryptocurrencies will be available for payment within this channel. When these deposits are made, they are not recorded on blockchain and this is why Lightning Network can operate fast and cheap. 

Make Payment

Once funds are available in these payment channels, then it’s time to make transactions. During this time, the recipient will request a certain amount of Bitcoin and will send you a sort of Lightning Invoice, which can be in the form of the QR code. After this,you simply need to confirm the transaction in the wallet app and that’s it, you have made a Lightning Network transaction. 

Final Thoughts

Bitcoin is here and by the looks of things, it will be here for a long time. But adapting it the way Satoshi Nakamoto wanted has become impossible, thanks to increasing prices and demand on this currency. This is why Lightning Network was created for the sole purpose of fixing these flaws in the Bitcoin system and so far, it has managed to do its job. But Lightning Network is still far away from being a perfect solution for challenging these problems, as it has some flaws in itself. For example, since transactions are happening off-chain, there are possibilities that stuff will go wrong and transactions might have some problems. This is why it is always advised to wait for multiple conformations in order to fully confirm that a transaction has gone through. 

FAQs on using Lightning Network

How do I connect to Lightning Network?

In order for you to connect to the lightning network, first you need to acquire a crypto wallet that supports Lightning Network. When it comes to choices, there are both custodial and non-custodial wallets to choose from based on your preferences. Once you acquire this wallet, it will have functionality of connecting to the Lightning Network and you will be able to make transactions using this fast and cheap system.

Should I use the Lightning Network?

If you don’t like the long transaction times and high fees of Bitcoin transactions, using Lightning Network is the best option available right now. When you use Lightning Network, transactions go through in a few seconds, unlike traditional Bitcoin transactions, where it might take a few hours. There are also lower transaction costs, as Lightning Network transactions will cost less than cents, while traditional transactions can cost up to tens of hundreds of dollars.