Why does Bitcoin need the Lightning Network: a complete guide to the second-layer payment protocol

In the Bitcoin ecosystem, the Lightning Network represents a solution that fundamentally changes transaction practices. It is a second-layer protocol (Layer-2) operating on top of the main Bitcoin blockchain, enabling users to work with digital assets much more efficiently.

Why the Lightning Network Became a Necessity

The main Bitcoin network has a serious limitation: its throughput is only 7-10 transactions per second. As network activity grows, this leads to congestion and a sharp increase in fees. The Lightning Network addresses this problem radically — its capacity reaches 1 million TPS.

Today, as Bitcoin ordinals and BRC-20 tokens attract widespread attention, scalability becomes critically important. The Lightning Network allows for microtransactions with minimal costs, which was previously impossible.

How the Lightning Network Architecture Works

The Lightning Network operates through the creation of payment channels between network participants. These channels work off-chain (off-chain), but rely on its security.

Principle of operation:

• Two users open a multi-signature channel, depositing funds
• Inside the channel, they can conduct an unlimited number of transactions instantly
• Only the initial channel opening and closing are recorded on the blockchain
• The final distribution of funds is recorded in the main Bitcoin ledger

The system also supports payment routing — transactions can pass through a network of connected channels, even if there is no direct channel between participants. This allows any bitcoin lightning network wallet user to send funds to anyone else in the network.

Development History: From Theory to Practice

The concept of the Lightning Network was first described in a whitepaper published by Joseph Poon and Thaddeus Dreyzeh in 2015. However, the theory would remain just that if developers hadn’t implemented it in 2018, launching the first beta version on the Bitcoin mainnet.

Since then, the Lightning Network has evolved from an experimental project into a stable infrastructure serving a growing volume of payments.

Bitcoin vs. Lightning Network: When to Use Each System

These two systems complement rather than compete with each other:

Main Bitcoin blockchain is intended for:

• Large transactions with high value
• Long-term storage (as “digital gold”)
• Maximum security through a decentralized consensus mechanism
• Full transparency and immutability of records

Lightning Network is ideal for:

• Daily microtransactions
• Payments between users without intermediaries
• Fast settlements with minimal fees
• Operations requiring privacy (payment data visible only to participants)

Technical differences:

• Security: Bitcoin provides absolute reliability but at the expense of speed; Lightning Network sacrifices some decentralization for speed
• Privacy: all Bitcoin operations are open for analysis; Lightning Network payments are private
• Cost: fees on Bitcoin can be high during network congestion; Lightning Network is virtually free

An interesting point: the Lightning Network works not only with Bitcoin. The protocol is compatible with Litecoin, Stellar, XRP, Ethereum, and Zcash, making it a versatile tool for cross-chain operations.

The Critical Role of the Lightning Network in the Current Context

The role of the Lightning Network is growing for several reasons:

1. Solving scalability issues The Lightning Network increases transaction throughput by thousands of times, eliminating the bottleneck that has limited Bitcoin for years.

2. Instant settlements While a transaction on the main network may wait for several blocks, the Lightning Network provides near real-time settlements.

3. Cost savings Minimal fees make Bitcoin a practical tool for any operation, including online store payments and transfers between friends.

4. Increased adoption By removing barriers such as (speed, cost), the Lightning Network promotes broader use of Bitcoin in everyday life and commerce.

With new trends emerging, such as Bitcoin ordinals and the active development of the BRC-20 ecosystem, demand for scalable solutions is only increasing. The Lightning Network is becoming a critically important component of this growing ecosystem.