Lightning Network

Page Summary

The Lightning Network is a Layer 2 payment protocol used by cryptocurrencies like Bitcoin and Litecoin. The Lightning Network enables fast transactions and solves the Bitcoin scalability problem. 

lightning-network

How does the Lightning Network work?

It works by using a bidirectional peer-to-peer system. This allows users to make micropayments with cryptocurrencies on separate blockchains. Users use the Lightning Network by opening a payment channel. This commits a funding transaction to the layer 1 blockchain. When both parties confirm the distribution of funds a node closes the payment channel by broadcasting the transaction information to the network.

If either party doesn’t confirm the transaction there will be a dispute period. In this period nodes contest the broadcast distribution. If any node succeeds in broadcasting a more up-to-date distribution, all funds will be transferred to this node. This prevents nodes from broadcasting out-of-date transactions and thereby defrauding the network. 

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