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What is Lightning Network and How Does It Work?

Lightning network is a payment protocol located on the bitcoin blockchain and can be applied to all cryptocurrencies. This protocol is designed to reduce network density over time and improve transaction quality. In a way, it is the product of work done off-chain to minimize the density created by the increasing number of transactions. In this way, people make transactions quickly and micro-transactions take place easily.


As a result of this transfer process, which is made by creating a path outside of the blockchain network, transactions do not go through miner approval. Thus, no fees are charged for transactions that do not pass miner approval. In this way, micro-transactions can be carried out easily and these transactions made within a created channel are registered to the blockchain after they are completed.


Users who do not want to open channels between each other can transfer using channels configured by different people. For transactions made using the Lightning network, both parties must be online. If one of the parties is offline, the transaction will not take place, unlike transfers that take place on the blockchain. After the transfers are completed, the channel is closed and the transactions are recorded on the blockchain in the same way. In this context, transactions can be made unlimitedly as long as the channel remains open and the parties are online, but after closing, transaction summaries are signed and published on the blockchain.


Thanks to the Lightning network, it is widely believed that cryptocurrencies will transform positively in the coming years and increase the use of cryptocurrencies in shopping. Although the concept was developed considering the difficulties faced by bitcoin, all cryptocurrencies can benefit from the lightning network.