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In this article we will explore the evolution of Bitcoin’s Lightning Network, from its origins to its current state, examining its advancements, challenges, and future potential.
Bitcoin is revolutionary, but its scalability issues limit its ability to handle a large number of transactions quickly and affordably. The Lightning Network (LN), introduced in a 2016 whitepaper, is a second-layer solution designed to fix this by enabling faster and cheaper transactions.
This article explores the evolution, advancements, challenges, and future of the Lightning Network.
The Lightning Network, often referred to as Bitcoin's 'Payment Scaling Layer,' was first proposed in 2016 and saw its full launch in 2018.
By 2024, adoption surged as major businesses, utility providers, and tech companies built on the network, enhancing Bitcoin’s efficiency. Today, major U.S.-based exchanges like Kraken and Coinbase support Lightning payments, marking a significant milestone.
Lightning adoption has accelerated, with 2024 seeing a record number of businesses integrating the technology—a trend expected to continue in 2025.
Bitcoin's base layer can process around 7 transactions per second (TPS), but in real-world conditions, it typically ranges from 3.3 to 7 TPS—far below traditional payment systems like Visa.
Read more: Bitcoin scalability problem
Visa’s network is theoretically capable of processing over 65,000 transaction messages per second, though in practice, it averages around 1,700 TPS, peaking at around 15,900 TPS in 2018.
To scale Bitcoin transactions, Layer 2 solutions like the Lightning Network enable instant, high-volume, and low-cost payments, significantly increasing Bitcoin’s effective TPS.
Bitcoin’s transaction fees vary based on network demand. As of February 2025, fees have fluctuated significantly. On February 1, the average fee dropped to $1.37 (a 12.21% decrease from the previous day and a 79.15% decrease year-over-year). However, by February 24, total daily fees reached $1.324 million—a 5.43% increase from the same day last year.
Bitcoin is often a cost-effective option for large transfers, but for micro-transactions (e.g., buying coffee or making small donations), transaction fees and confirmation times can be a drawback. Layer-2 solutions like the Lightning Network and Lightning-integrated Bitcoin wallets help address these issues by enabling faster, low-cost payments.
With Blink Wallet, you can send Bitcoin instantly and at low fees using the Lightning Network, get started with Blink.
The Lightning Network (LN) builds on Bitcoin’s base layer by addressing its scalability limits. Bitcoin transactions must be recorded on-chain in blocks added every ~10 minutes, creating a hard cap on transaction volume unless the protocol is significantly modified. LN bypasses this by enabling off-chain transactions, reducing congestion and fees.
Read more: How do Bitcoin transactions work?
Bitcoin protocol debates have led to hard forks, like Bitcoin Cash. Instead of forking, the Lightning Network (LN) operates as a layer-2 solution, enhancing scalability and speed without altering Bitcoin’s base protocol—offering benefits similar to major reworks, but within the existing network.
The Lightning Network (LN) enables faster transactions by creating a payment channel between two parties. Only the first and last transactions are recorded on-chain; all others occur off-chain, bypassing Bitcoin’s protocol limits and reducing fees.
To open a Lightning Network (LN) payment channel, both parties commit Bitcoin, which remains locked while the channel is open. The maximum transferable amount is limited to the total Bitcoin committed by both parties. Here’s an example to illustrate this:
Opening a Payment Channel
Imagine Alice and Bob want to set up a Lightning Network payment channel.
Making Transactions
Now that the channel is open, Alice and Bob can exchange BTC freely without needing the blockchain:
1. Alice sends Bob 1 BTC → Alice: 9 BTC, Bob: 6 BTC
2. Alice sends Bob 2 BTC → Alice: 7 BTC, Bob: 8 BTC
3. Bob sends Alice 3 BTC → Alice: 10 BTC, Bob: 5 BTC
4. Bob sends Alice 1 BTC → Alice: 11 BTC, Bob: 4 BTC
Closing the Channel
When Alice or Bob decides to close the channel:
Routing Payments Through the Lightning Network
If Alice wants to send 1 BTC to Carol but has no direct channel, she can route payments through Bob, who has a channel with Carol.
Bob forwards the transaction, possibly charging a small fee. As more channels form, Alice can transact with anyone by routing payments through intermediary nodes, just like how the internet relays data across multiple servers.
P.S. The network is shifting from smaller, inefficient channels toward fewer, larger, and well-connected nodes.
The Lightning Network (LN) creates a mesh network where users connect through multiple payment channels. Even without a direct channel, transactions can be routed through intermediate nodes, enabling seamless payments.
For example, even if Node A is only connected to Nodes B and C, it can still transact with Node Q by routing payments through the network. This efficient routing enables instant, low-cost Bitcoin transactions globally.
The Lightning Network (LN) is a relatively new protocol facing challenges in usability and security which are highlighted below.
1- Challenges of Running a LN (Lightning Network) Node
The average channel capacity has increased by 214% over four years, while the number of channels per node has decreased by 30%.
A major challenge for LN adoption is the complexity of running a Lightning node. While LN relies on a strong network of nodes, operating one requires technical knowledge and ongoing management, which may deter smaller participants. However, setting up and maintaining a LN node can be complex, and smaller nodes may struggle with payment incentives. While running an LN node isn't drastically harder than operating a full Bitcoin node, the added complexity could limit adoption.
2- Usability vs. Security Trade-offs
Since LN primarily supports micro-transactions, most users will interact with it through LN-enabled wallets. However, these wallets come with trade-offs:
Balancing usability, security, and decentralization remains a challenge for widespread LN adoption.
Read more: Choosing The Right Bitcoin Wallet
3- Vulnerabilities
The Lightning Network (LN) has been identified as vulnerable to several types of attacks, including:
While vulnerabilities exist, there have been no major reported exploits. The complexity of these attacks makes them difficult to execute, and developers continue working on mitigations, viewing the identification of vulnerabilities as a necessary phase of growth. Addressing certain attacks, such as pinning and time-dilation, may require updates to both LN implementations and Bitcoin Core.
The Lightning Network faces challenges, but as a relatively young protocol, these growing pains are expected. Developers are actively refining the system, and future improvements could enhance Bitcoin’s scalability and adoption.
The Lightning Network is revolutionizing Bitcoin payments, and Blink Wallet makes it easier than ever to use. Ready to experience seamless Bitcoin payments via the Lightning Network? Download Blink Wallet now and start transacting instantly
