Bitcoin has a problem its supporters rarely mention in the headlines: the base layer processes about 7 transactions per second. Visa processes more than 24,000. For Bitcoin to be the global payments system its defenders imagine, it needs a scaling solution. That solution is called Lightning Network.
Lightning is a protocol layer built on top of Bitcoin that lets two parties open a payment channel. Once the channel is open, the two parties can send each other satoshis (the smallest Bitcoin unit, 0.00000001 BTC) indefinitely without recording each transaction on the base layer. Only the channel's opening and closing are written to the blockchain.
The result is spectacular. Lightning transactions are practically instant (milliseconds), fees are ridiculously low (fractions of a cent even for $0.01 payments), and privacy is greater than on the base layer because the intermediate transactions are not recorded in the public ledger.
The Lightning network has grown explosively over the last two years. Total channel capacity exceeds 10,000 BTC, and the number of active nodes is around 20,000 across more than 100 countries. In El Salvador, where Bitcoin is legal tender, most everyday payments already happen on Lightning.
Companies like Block (Jack Dorsey) have bet everything on Lightning. Cash App lets you send Bitcoin to anyone in the world in seconds with no fees. Strike, founded by Jack Mallers, has built a remittance system that uses Lightning to send money to any country at a 0% fee. For millions of migrants who send money home, this is transformative.
The most important technical challenge Lightning faces is liquidity. For a payment to work on the network, the channels it passes through must have enough capacity in the right direction. Managing this liquidity is complex and requires specialised operators called routing nodes. But advances in automatic liquidity management are solving the problem.
What most excites Lightning developers is not the $10 payment in a shop, but the $0.001 payments that make entirely new things possible: paying for each article you read, each second of video you watch, each API call you make. The machine economy that AI needs to function could run through Lightning.
