Lightning Network
A Bitcoin payment layer that moves small transfers off-chain through bidirectional channels, settling on-chain only at close.
Two parties open a channel by locking bitcoin in a multisignature address. They then exchange signed balance updates as often as they like, paying no fee until one side closes the channel and broadcasts the final state to the blockchain. Routing lets payments hop across channels to reach someone you share no direct channel with.
Throughput is high and fees run a fraction of a cent. The tradeoffs are real. Channels must be funded up front, and a node that goes offline can be cheated with a stale balance. Routing liquidity can also dry up for larger payments.
Related terms
A scaling technique where participants transact off-chain through signed messages, posting only the opening and final balances on-chain.
Off-ChainTransactions or data handled outside the blockchain, then sometimes settled on it later in batches.
Layer 2A separate network built on top of a base chain to process transactions faster and far more cheaply.
ScalabilityA network's capacity to handle more transactions and users without fees and delays spiking.