This article will fully guide you on the process of setting up the wallet and making up the initial payment.
Demystifying the Lightning Network
The Lightning Network is a fully decentralized system that is used for high-volume, instant micropayments where third parties are not included in the process. This network uses a layer-2 protocol that is designed over the basic Bitcoin layer. With this high protection Bitcoin standard, this network is considered to be really secure option.
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When speaking about the Bitcoin system of online transactions, it is comparatively slow. Some payments can be finalized within an hour. This is a secured system, but not the most ideal variant for small transactions.
Lots of waiting periods, and high fees, make Bitcoin not the ideal method for usual everyday payments. It is difficult to imagine that a user is purchasing coffee with Bitcoins.
The Lightning network simplifies the process by using multi-party smart contracts. This network makes the payments immediate because there is no need to record these transactions on the blockchain. That means users should not wait long before the finalization of the process.
The Lightning Network is the quickest method for receiving/sending Bitcoins with a minimal fee for the transactions. With the higher demand for micropayments, there will be a serious necessity to develop a layer-2 chain as the Lightning Network is now trying to accomplish.
Initiating Payments on the Lightning Network
For the successful payment process with Lightning Network, both sender and receiver should have a Bitcoin wallet with access to Lightning.
Most users prefer mobile access because of the quickness of such transactions. Several great options for Lightning Bitcoin wallet are such as Cash App, Muun, Phoenix, and Wallet of Satoshi. All these mentioned apps are available for Android as well as iOS users. If specifying the most used variant, it is Muun. It is a fast trade between off-chain and on-chain digital assets and also offers submarine swaps.
Submarine swap is a transaction type that simplifies the crypto exchange. The Lightning Network is used here for quick transactions. Most of the available wallets have high protection levels with multi-signature features.
Once a user makes an initial BTC deposit into Lightning wallet, the channel is opened and you have entered a network. The channels can be either direct or routing payment. With the direct option, users can create a connection between 2 specific users, and with routing you can access any user in the network.
The procedure of payment with Lightning Network is straightforward and includes only a couple of the following steps:
- Open your wallet on the Lightning Network page.
- Press “Send”.
- Scan the QR code or fill in the address of the recipient manually.
- Confirm all the details and press “Send”.
For receiving Bitcoin, almost the same steps should be followed.
Lightning Network wallets are perfect for storing minimal Bitcoin sums for everyday usage. As it is already clear, Lightning Network offers quick transfers, and they can be even easier when using QR codes, in such a way you are excluding errors and additional time for manual filling in of the address.
Loading Your Lightning Network Wallet with Bitcoin
To open a channel, a user should have BTC. Here is a simple process of how to upload BTC to the wallet:
- After you have chosen a needed wallet, choose Lightning Network or Bitcoin for setting up.
- Click on “Receive”.
- Check whether the details of the transaction are valid.
- Use a QR code for specifying the wallet from which you will get the funds.
- It is possible to add an invoice.
Once you have BTC, the channel is opened and you can receive/send crypto with no limitations. For all the new users, it is recommended to have a minimal needed BTC sum in the wallet. This is still an experimental approach that helps with online transactions, and it is not ideal for storing.
The Guardians of the Lightning Network
This open-source project was launched in 2015 by the research scientists. The Lightning Network was created by Tadge Dryja and Joseph Poon and their initial plan was to create something that will have lower transaction fees. The new virtual payment system was designed on the basis of the Bitcoin chain. The popularity of this project started in 2016, with several publications in the media. Since then the interest rate from investors and developers has been growing.
In 2016, the company Lightning Labs which owns this project got Elizabeth Start as a co-founder. This organization also released a beta version for testing purposes while at the same time, it specified the importance of layer-2.
The decentralized financial approach is really popular nowadays as a concept and a practical method of changing everything in the financial sphere. Lots of new tools and resources are developed and updated to create the best possible user experience. With the higher interest in Bitcoin, Lightning Network is also becoming an extremely useful tool for quick and easy micro transactions.
Receiving Bitcoin through the Cash App
For receiving BTC, this process should be enabled within the app. This is a simple process that includes the following steps:
- Enter the home page of the Cash App and press “Money”.
- Choose “Bitcoin”.
- Press “Deposit Bitcoin” to initiate the process.
- Fill in the wallet Bitcoin address into the sender’s box.
The wallet has a unique address that is automatically changed after every successful deposit and that is really important to guarantee the privacy of every transaction. This unique address can be used for getting BTC from a third party. When speaking about the max possible deposit, which is $10, 000, this limit is given for the period of 7 days. One more thing to keep in mind is that transfer can take some time before the completion. It takes so long because the transfers happen in the base-layer chain.
Harnessing the Power of the Cash App and the Lightning Network
For the minimizing of the fees and quicker transactions, in 2022 Cash App added Lightning to the BTC wallet. The process of sending Bitcoin via Cash App Lightning includes the following steps:
- Enter the home page, by pressing “$” tab.
- Press the QR scanner that is located on the top left part.
- Scan the QR code of the Lightning invoice.
- Confirm and pay.
- Now let’s proceed to the receiving of BTC via Cash App Lightning, they are the following:
- Open the application and select “money” tab.
- Choose “Bitcoin”.
- Choose “Receive”.
- Share the QR code with the sender and scan.
It is really convenient that the sender should not have an account in the Cash App in order to get BTC with Lightning. However, the sender should enable Lightning Bitcoin wallet.
Transferring Funds via Lightning Addresses and LNURLs
Lightning Network is gradually increasing in popularity among users mainly because of its better adoption into the cryptocurrency world via the different exchanges and service providers. In the spring of 2022, Kraken was among the first ones who implement Lightning. In 2023, Coinbase announced its partnership with the Lightning Network. It means that really soon we will be noticing how the most used exchanges will start adopting BTC immediate payments into their system.
In the winter of 2022, Lightning Network added an address. This address can be somehow compared with the email address but one that specifically is used for Bitcoin. So that anyone in the world can send BTC immediately on the Lightning Network.
Lightning addresses is an important addition to the payment service and lots of users are trying to explore this novelty. Of course, there might be some technical issues when talking about the full adoption of this service.
To conclude, the article has all the guidance about setting up a wallet, sending/receiving payments, and lots of additional info about Lightning Network. It will be really helpful for all who would like to explore this method of payment but don’t know where to start.