Lightning lets two parties open a channel with an on-chain transaction, exchange any number of payments between themselves off-chain, and settle the net result back on-chain later. It solves cost and speed for small payments. The trade-off is liquidity management and the need to be online to receive, which is why custodial Lightning wallets remain popular despite reintroducing counterparty risk.
Lightning Network
A payment layer built on Bitcoin that settles most transfers off-chain, keeping them fast and cheap.
Also called: Lightning, LN
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