How to send and receive payments on the Lightning Network
Learn how to use the Lightning Network by creating a wallet, replenishing it and using it to make and receive payments.
To send and receive payments on the Lightning Network, users must first create a Lightning wallet and top it up with Bitcoin.
After that, you can create payment channels and start making transactions.
In this article, we will tell users how to go through this process, starting with creating a Lightning wallet and ending with making the first payment on the Lightning network.
What is the Lightning Network?
The Lightning Network (abbreviated LN or simply Lightning) is a decentralized system of instant micropayments of large volume, which does not allow users to transfer the rights to store funds to trusted third parties.
This is a second-level protocol – a computer network built on top of the Bitcoin base layer (level 1), the blockchain itself.
To ensure the security of the Lightning Network, high standards of protection of the Bitcoin base level are used.
Bitcoin is a payment system designed for slow payments, transactions in which are completed within an hour.
This is due to the fact that Bitcoin collects transactions in blocks arranged on average with an interval of 10 minutes, and payments are considered safe after confirming six blocks, which is about an hour.
This is not an ideal option for micropayments and small transfers, which are usually inefficient due to high base-level fees.
Imagine people waiting for an hour to pay for a coffee or a train ticket when they scan their phone through the station gates.
High fees in total make the entire payment process clumsy, inefficient and too expensive for everyday transactions on the Bitcoin network.
The Lightning Network solves these problems by being one of the first implementations of a multi-party smart contract using embedded Bitcoin scripting. In the Lightning Network, payments are instantaneous, atomic and are not recorded in the blockchain, so no block confirmation is required to complete them.
The Lightning network can be used by retailers for terminals at points of sale, by individuals for transactions between devices, for example, for money transfers, or in any other cases where instant payments are required without third-party confirmation.
To meet the growing demand for payments and micropayments in Bitcoin, the network will need to support a much larger volume of transactions that cannot be scaled on the first-level chain.
That is why the Lightning Network is considered by many to be a solution for scaling Bitcoin in such a way as not to disrupt its decentralization and not to delegate trust and ownership.
How to pay on the Lightning Network
To make payments on the Lightning network and users need to get a bitcoin wallet with support for the lighting network, in which funds are placed on a two-way “channel” bitcoin address with multiple signatures.
It is clear that a person or will undertake who needs to pay, will use bitcoin with access to Lightning for just as long and for sure.
Most wallets are mobile, because it is easy and often possible to make instant payments using a phone.
Applications for Bitcoin Wallets Lightning, Satoshi wallet, Phoenix and Cash, which can be downloaded on both iOS and Android.
Muun allows you to perform underwater swaps – fast trading between digital assets on the chain and off the chain.
An underwater swap is a type of off-chain cryptocurrency transaction that allows you to exchange one cryptocurrency for another.
The Lightning Network is used to ensure fast and inexpensive transactions.
Phoenix (non-custodial wallet) and Wallet of Satoshi provide almost instant secure payments with minimal fees.
Most wallets are not custodial, i.e. Bitcoin funds are only under the control of their owners, and have the function of multiple signatures as an additional level of protection of the private key.
By depositing BTC into the Lightning wallet, users open a channel, and this is their entry into the network.
Even if it is impossible to see, every time a user pays with a new person or a new enterprise using the Lightning Network, he opens a channel with this counterparty.
This channel can be direct, specially created between the two parties for the convenience of making transactions. Or it can be a routable payment via Lightning, which allows Lightning transactions between two unrelated parties to use a number of already existing channels.
After creating a channel, users get access to the public channels of the entire network, stitched together and ready for routing payments, and lightning nodes are looking for the best route to conduct a transaction.
That is why when a user pays with a new seller, he can do it instantly by simply scanning a QR code, without having to open a direct channel.
Payments pass through the channel instantly, with virtually zero fees, without constantly going through the Bitcoin base layer.
How to fund your Lightning Network wallet with BTC?
In order to open a channel or make a payment, the user needs to have a certain amount of BTC on the wallet. To top up a Bitcoin wallet, you need to perform the following usual actions:
- It is necessary to configure the wallet to use the basic Bitcoin chain (Bitcoin wallet) or the Lightning Network (Lightning wallet). Select the wallet network you want to use.
- Go to the “Get” item and click on it.
- Check that the transaction details are correct.
- Scan the QR code or copy and paste the receiving address to the wallet from which you receive funds.
- You have the option to add an invoice for payment. Click on the “Account” button to continue.
After receiving BTC and opening a channel, you can send and receive Bitcoin without time and amount restrictions.
The Lightning Network is still considered experimental and needs to be finalized, so it is not recommended to store significant amounts of BTC in the Lightning wallet.
Who runs the Lightning Network?
Lightning Network is an open source project, the idea of which belongs to research scientists Joseph Poon and TadgeDryjain 2015.
The project was conceived as a way to solve the problem of a significant increase in the commission for Bitcoin transactions and was a new payment system built on the basis of the Bitcoin blockchain.
In January 2016, the duo published a technical document, and the project began to gain momentum among developers and investors.
In the same year, Elizabeth Stark co-founded Lightning Labs, a company engaged in the development and support of the Lightning Network. The company has released a beta version of the ecosystem for testing by developers, demonstrating the value of second-level solutions for the entire ecosystem.
With the growth of funding and interest in the Lightning Network, such an ecosystem is gaining more and more popularity among bitcoin enthusiasts, especially in light of the creation of the Lightning Network smart contract, which can open up opportunities for decentralized finance and other applications.
How to receive Bitcoin on the Cash App?
To top up your Cash App account, you need to enable the withdrawal and input of bitcoins in the application by following these steps:
- Go to the “Money” tab on the main screen of CashApp.
- Select “Bitcoin”.
- To get started, click on the “Top up your account” button.
- Copy the address of your Bitcoin wallet to the appropriate sender field.
The unique wallet address can be used to receive Bitcoin from third parties to your account and will change after each successful deposit to ensure greater privacy. Within seven days, users can top up their account with up to $10,000.
Since the Bitcoin transfer takes place along the basic level chain, the confirmation of the transfer may take several hours.
How to use the Cash App Lightning Network?
In October 2022, Cash App added Lightning Network to the Bitcoin wallet to enable faster Bitcoin transactions with minimal fees.
Here’s how to Send BTC using the Lightning Network Cash App:
- Click on the “$” payment tab in the Cash App to view the home screen.
- Select the QR scanner in the upper left corner of the screen.
- Point the camera at the QR code of the Lightning invoice to scan it.
- Follow the instructions to confirm and pay for the request.
Similarly, the following steps show how to get Bitcoin using the CashApp Lightning network:
- Open the Cash App and go to the “Money” tab.
- Select “Bitcoin”.
- Click on the “Get” Bitcoin button.
- Tell the sender the QR code or link and scan it.
To receive Bitcoin using the Lightning Network, the sender does not need an account in the Cash App to pay for the user’s request, however, the sender will need a Bitcoin wallet with Lightning support.