Can You Send BTC To A Lightning Wallet?
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On-chain bitcoin transactions can take a long time to confirm, meaning you might have to wait for up to an hour for a confirmed transaction. If you’ve been frustrated by such an experience using Bitcoin, then you would want to look for a faster alternative.
Fortunately, crypto users have such an option today. The Lightning Network (NT) is an alternative way to use Bitcoin funds for faster transactions. Users can send BTC to the Lightning network.
However, you cannot send BTC directly through LN to pay for a service. This may sound confusing, but the process is simple in reality, thanks to many user-friendly apps available today.
What is the Lightning Network?
Bitcoin’s original design was not scalable. This is because it only focused on secure autonomous transactions. It was meant to be a network for users to conduct cashless peer-to-peer transactions while remaining anonymous.
Years after Bitcoin was founded, it became very popular, which is when its downfall started. As the number of users dramatically increased, the network became congested. As a result, BTC transfers took time and became expensive. This was the opposite of what the cryptocurrency platform was intended for.
To solve these problems, the Lightning network was implemented in 2017 as a second layer on top of the Bitcoin blockchain. This layer provided additional functionality to the existing Bitcoin network by allowing faster BTC transactions. Transactions are in the form of micropayments and can be sent in both directions between the sender and the receiver.
How does the Lightning Network Work?
The lightning network works like a routing network for BTC transactions. It is an off-chain solution that does not have a native cryptocurrency. The network is made up of nodes that are connected to the Bitcoin network and have committed several funds from their Bitcoin wallets. This commitment of funds works like a basic smart contract.
When a user sends BTC to the Lightning Network, participants in this layer quickly route the funds through nodes to the other user, creating a channel. As we mentioned, this channel is not on the Bitcoin blockchain, but it records the withdrawals and deposits from the Bitcoin network. The channel can remain open to allow 2 parties to exchange BTC multiple times.
To confirm all transactions to the mainnet, the channel between the two parties must be closed. When a channel is closed, the Lightning network records the information to the blockchain. The funds are then moved out of the lightning network.
The Lightning Network requires several computers to remain connected to it to allow quick and efficient fund transfers. A high number of computers connected to it also ensures an adequate level of BTC funds is available for transactions. To prevent fraudulent transactions, the Lightning Network has a ‘watchtower’ system that detects users who try to prematurely close channels by abruptly disconnecting from the network.
Additionally, the Lightning Network has built-in functionality to connect to off-chain parties. This allows it to connect to third-party merchants who do not have a direct Bitcoin address to receive payments in BTC.
What are the Benefits of the Lightning Network?
The Lightning Network was built to solve several problems in the original Bitcoin Network. Here are some reasons many use it.
Bitcoin has a block time of 10 minutes. When a block of transactions is completed, users will have to wait 10 minutes for a new block to be created. Because of this, BTC transactions typically occur at a rate of 3-7 TPS. The Lightning Network can process as many as 1 million transactions per second. That figure makes it more efficient than MasterCard or Visa. So if any business is looking to integrate BTC payments, this network provides a scalable solution.
Low Transaction Fee
Transactions on LN have a very low fee. The base fee for one computer (or node) is 1 Satoshi. This can be increased to route transactions through a specific node. Even if a node charges 100 satoshis, the equivalent amount in USD is reasonable. Visa and MasterCard charge as much as 3% of the entire transaction amount, so LN is a very economical option for transferring cryptocurrency funds.
Bitcoin is notorious for its high power usage. It has been criticized by environmental activists, for this reason, claiming that it is not sustainable in the long term. The Lightning Network is faster and consumes much less energy than the Bitcoin mainnet. Therefore, LN is a sustainable alternative for using Bitcoins.
The Lightning Network allows users to create separate payment channels for different merchants or users with whom they exchange cryptocurrencies. These can include friends, businesses, or retailers. Coupled with a high transaction speed, the network can make near-instant online payments from any device.
Disadvantages of Lightning Network
Security and Fraud
A big problem with the lightning network is the possibility of fraudulent transactions. For example, party A sends 1 Bitcoin to party B in exchange for goods. Once part A receives its goods, Party B can immediately log off. This allows party A to continue to broadcast the initial state of the transaction, and they will receive a refund of 1 BTC from the Lightning Network. In this situation, party A will get goods for free.
Therefore, the Lightning network requires third parties to monitor the network as watchtower nodes. A lack of users or a concerted effort to close channels in this way without adequate fraud detection measures can lead to stolen funds from the network.
The Lightning Network relies on a large number of nodes for maximum efficiency. If many nodes are inactive at a given time, then the network can experience a slowdown.
Similarly, some users are concerned about commercially operated nodes that are constantly online. Such nodes may become central hubs for approving transactions down the road, allowing the owners to charge a higher transaction fee.
How can I send BTC to a Lightning wallet?
To send Bitcoin to a Lightning wallet, you will first need a BTC wallet. You can read more about Bitcoin Wallets in our previous guide. You will also need to register yourself to a Lightning Network app that will create a Lightning Wallet.
Alternatively, some crypto exchanges like Binance and Kraken can allow you to create a Lightning Wallet on your account. Once you have set up both, you can transfer BTC to your Lightning wallet.
The steps for doing this may vary across different apps but here’s a list of typical steps you will need to complete. We assume you already have a Bitcoin wallet. For this example, we’re using the Phoenix App. The setup takes a few minutes.
- Select and download a Lightning Network Provider Application from Google Play Store or the Apple App Store.
- Complete the registration process and navigate to the option to create your lightning wallet. Some apps will present this option immediately after registering.
- Select the option to create your lightning wallet.
- Find the recovery or seed phrase options and generate your seed phrase. Write it down somewhere and keep it in a safe place.
- Start sending BTC to your Lightning wallet address. The verification process usually requires scanning a QR code.
- Confirm the transaction on the Lightning app.
- Check the transaction in your transaction history. If you are using an exchange, this will also show up in its interface.
A list of Lightning Wallets
Here’s a list of Lightning apps you can use to create a Lightning wallet. Some of these applications provide non-custodial wallets, meaning you will have full control of your funds.
However, you will need to remember the seed or recovery phrase. Once you lose the seed phrase, you will be unable to access your wallet in case it is compromised or you forgot your login credentials. Most of the wallets listed below are non-custodial.
- Zeus – Android/iOS. Has a big developer community and allows users to download apk files
- Bluewallet – Android/iOS. Privacy-focused Lightning wallet. Allows you to buy BTC.
- Phoenix - Android/iOS. An easy-to-use Lightning wallet
- Breeze – Android/iOS. Open source and allows google Drive syncing
- Wallet of Satoshi - Android/iOS. A simple application with multiple languages
- BLW – Android. Standalone LN App with SPV node functionality. Can be used to provide watchtower services and collect payments offline
- Éclair Mobile - Android. Open source mobile wallet with regular BTC wallet functionality
- Zap - Android/iOS. An advanced wallet for expert users
- Tippin.me – Desktop. Custodial LN wallet that is based on a browser extension. Allows payments to be made to Twitter users.
The Lightning Network is paving the way for the mainstream adoption of Bitcoin through fast mobile payments. Our guide demonstrates that you can easily download one of many Lightning applications to get started.
It’s only a matter of time before well-known businesses and brands begin to offer the Lightning Network as a payment option.
The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.