Why does Bitcoin need the Lightning Network: from problems to solutions

2025-12-26 14:13:20

Imagine: you want to send a small amount of Bitcoin, but the fee turns out to be higher than the payment itself, and confirmation takes hours. This very problem led to the creation of the Lightning Network — a second-layer ( Layer-2) that radically changes how we interact with Bitcoin.

Why Bitcoin faced a bottleneck

The Bitcoin blockchain can process only 7-10 transactions per second. As demand grows, this creates queues and rising fees. That’s why Bitcoin is positioned as “digital gold” for large transactions, rather than as an everyday payment system.

The Lightning Network solves this problem elegantly: instead of recording each operation on the blockchain, it creates payment channels between participants, where transactions are conducted off-chain almost instantly.

How it works in practice

The Lightning Network uses multi-signature wallets to create channels between two parties. Inside these channels, an unlimited number of operations can be performed without recording on the blockchain. When participants want to close the channel, only the final state is recorded on-chain.

Moreover, transactions are possible even between participants without a direct channel — payments are routed through a connected network of channels. This turns Layer-2 into a full-fledged payment system with a throughput of up to 1 million TPS.

History: from theory to reality

The idea of the Lightning Network appeared in the whitepaper by Joseph Poon and Taddeus Dreyzeh in 2015, but in practice, the technology only started working in 2018 on the Bitcoin mainnet. This three-year gap showed how seriously developers approached the security of the solution.

Comparing two worlds: Bitcoin vs. Lightning Network

Parameter	Bitcoin	Lightning Network
Usage	Large rare transactions	Microtransactions and daily payments
Speed	Minutes-hours	Instantly
Fees	High during congestion	Minimal
Security	Maximum (decentralized consensus)	High, but requires compromises
Privacy	Low (all on the blockchain)	High (visible only to participants)
Recording	On-chain (the whole chain sees everything)	Off-chain (only start and end)

Versatility beyond Bitcoin

Interestingly, the Lightning Network is not limited to Bitcoin. The technology also works with Litecoin, Stellar, XRP, Ethereum, and Zcash, turning into a universal tool for cross-asset transactions.

How to use the Lightning Network: a practical guide

To start working with the Lightning Network, you need:

Choose a wallet — use a specialized app supporting Layer-2 (for example, Phoenix, Muun, Blue Wallet)
Fund the channel — send Bitcoin to the wallet address, the system will automatically create a payment channel
Make transactions — send funds instantly with minimal fees via QR codes or addresses
Close the channel (if needed) — withdraw funds to the main Bitcoin blockchain

It’s like opening an account at a small shop instead of visiting a bank every time.

Why this is especially important now

With the emergence of Bitcoin ordinals and BRC-20 tokens, the load on the blockchain is only increasing. The Lightning Network becomes critically important for maintaining Bitcoin’s functionality as a payment system, without turning it into a data storage where transactions are impossible due to block size.

The technology offers a balance: Bitcoin remains a secure and decentralized store of value, while the Lightning Network takes on the role of a fast and convenient means of exchange.

BTC-0,18%

LTC-0,27%

XLM0,52%

XRP-0,91%

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