What Is the Lightning Network?

On 19 January 2019 a pseudonymous Twitter user called Hodlonaut sent 100,000 satoshis (0.001 BTC) to the first person who looked trustworthy, along with one instruction: add 10,000 satoshis and pass it on.

The Lightning Torch, as it became known, made 292 passes in 83 days and reached people in 56 countries. Jack Dorsey, then running Twitter, was one of the holders. It stopped growing at 4.29 million satoshis, because that was the largest single payment the Lightning software of the day would carry, and in April 2019 it went to Bitcoin Venezuela, a charity.

Counting every pass, a little over 7 BTC moved, and none of those payments waited for a block. Strip away the stunt and that is the whole idea of the Lightning Network: bitcoin moving between people's computers and touching the blockchain only when a channel opens or closes. What follows is an explainer, not financial advice.

One transaction in, one transaction out

Take Ana, who buys beans from the same coffee roaster every week. To open a channel she locks, say, 0.01 BTC into an address the two of them share, one that can only be spent with both their signatures. That funding transaction is an ordinary Bitcoin transaction: it waits in the queue and gets mined like any other.

After that, the blockchain hears nothing for as long as the channel stays open. Every time Ana pays, the pair sign a new transaction that would split the locked coins at the new balance, and each of them keeps a copy without broadcasting it. Twice a year or twice a minute, it makes no difference, and the latest version replaces the one before.

Closing takes one more signature from each of them, on a transaction paying out the final balance, and that second on-chain transaction sends the coins back to their own wallets. If the roaster disappears, Ana can broadcast the latest version on her own and wait out a delay before she can spend. Two entries on the chain, any number of payments in between.

A penalty stops the roaster broadcasting an old version, one from before Ana paid. Each time the balance moves, each side gives the other a secret that turns the superseded version into a trap: broadcast it, and your partner gets a window in which to claim everything in the channel. In lnd, the node software from Lightning Labs, that window defaults to between 144 and 2,016 blocks depending on channel size, which is roughly a day to two weeks.

The trap only works if somebody is watching. A node that stays offline for the whole window can be cheated, which is why watchtowers exist: separate machines, your own or a paid service, that scan the chain for a stale channel state and respond on your behalf.

Paying someone you have no channel with

Opening a channel with every shop would be absurd, so payments travel across other people's channels. Suppose Ana has a channel with Ben, Ben has one with a bookshop, and Ana wants to buy a book.

The bookshop's invoice carries the fingerprint, technically a hash, of a random secret that only the bookshop knows. Ana offers Ben a conditional payment: the money is his if he can show the secret behind that fingerprint before a deadline. Ben makes the same offer to the bookshop with an earlier deadline. To collect from Ben, the bookshop has to reveal the secret, and Ben then uses it to collect from Ana.

So either every hop gets paid or the offers expire and the money stays put. That arrangement is a hash time-locked contract, or HTLC, and it is why Ben never needs to be trusted with the book money. Onion routing adds some privacy on top, because each hop sees only who passed the payment in and who gets it next.

Routing nodes take a cut: a flat base fee plus a proportional rate. Across public channels tracked by mempool.space in late August 2026, the median rate was 100 parts per million and the median base fee half a satoshi, so pushing a 50,000-satoshi payment through a typical channel cost about 5.5 satoshis.

From a 2016 draft to a national wallet

Joseph Poon and Thaddeus Dryja circulated the design in 2015, and the version still hosted on the paper's website is dated 14 January 2016. Lightning Labs shipped its first mainnet beta, lnd 0.4, on 15 March 2018, with advice to experiment only with small amounts.

The most public test began on 7 September 2021, when El Salvador's Bitcoin Law took effect, with the government's Chivo wallet offering $30 of bitcoin to each person who signed up. River, a bitcoin firm, powered Chivo's Lightning payments. Half of the country's households downloaded the app, according to a 2022 NBER study, yet more than 60% of downloaders made no further transaction once the free bitcoin was spent. In January 2025, as part of a $1.4 billion IMF loan agreement, lawmakers voted 55 to 2 to make accepting bitcoin voluntary, and the government started stepping back from Chivo.

Big apps and exchanges arrived gradually. Cash App added Lightning sending in early 2022 and receiving that October. Kraken switched on Lightning deposits and withdrawals in the spring of the same year. Binance, which had been working on Lightning, twice paused bitcoin withdrawals on 7 May 2023 as unconfirmed transactions approached 500,000. Its Lightning deposits and withdrawals opened on 17 July. Coinbase followed on 30 April 2024.

Usage is harder to pin down. River estimated at least 6.6 million routed payments in August 2023, averaging roughly 44,700 satoshis, and said the true total could be a multiple of that because direct and private payments cannot be observed.

Where it gets awkward

• Inbound capacity. A new channel holds money only on the opener's side, so the opener can send but cannot receive anything until some balance moves across. Merchants have to go and get inbound capacity, by asking or paying someone to open a channel towards them, or by swapping on-chain coins for it.

• Liquidity along the route. A payment fails if no path has enough balance on the right side of every channel. River's own success rate in August 2023 was 99.7%, and route liquidity was one of the two main causes of failure it named. The 4.29-million cap that stopped the torch went in lnd's August 2020 release, and big payments can now be split across several routes, but each route still needs the balance.

• Staying online. Bitcoin can land at an on-chain address while its owner sleeps. A self-custodial Lightning wallet has to be online to receive, and offline recipients were the other cause River named.

• Fees on the base layer. Opening and closing are normal Bitcoin transactions, so they pay whatever the queue demands. In block 840,000, mined on 20 April 2024 as the halving hit, the median transaction paid 34,800 satoshis in fees. At those levels, a channel holding 20,000 satoshis cost more to close than it held.

The shortcut most people take

Most Lightning users never open a channel in their lives. They download a custodial app, and a company runs the node and holds the coins for them. River estimated between 279,000 and 1.1 million monthly active Lightning users in September 2023, and reckoned that for every user holding their own keys there were roughly eight who let an app hold them.

That changes what a payment is. When one Wallet of Satoshi customer paid another, River pointed out, the transfer was an entry in the company's own database and never showed up in any Lightning node's transaction logs.

It also ties your access to the company's choices. Wallet of Satoshi pulled its app from US app stores in November 2023 without giving a specific reason. In July 2025 it began testing a version it describes as self-custodial, which it said would let it serve the US again.

How big is it?

Public trackers only see announced channels. On 26 September 2026 Bitcoin Visuals counted about 13,000 nodes with open channels and 36,700 public channels holding roughly 3,700 BTC. The channel count peaked at 88,155 in February 2022, while capacity set its record, around 5,850 BTC, in late December 2025.

Unannounced channels, the kind many mobile wallets use, never show up in those figures. A custodial app appears only as its operator's nodes, however many customers sit behind them. Other trackers count differently and publish different totals, so read any single figure as a floor.