All About Bitcoin

To get on board the crytoverse you first need to understand Bitcoin. Then, we will learn what the Lightning Network is.

What Is Bitcoin?

Bitcoin with a capital “B”, is used to describe the network of people who pay each other.

BUT…

bitcoin with a lower-case “b” is used to describe the money people use to pay each other on that network. Make sense?

Bitcoin (notice the capital letter), operates on a network of people who all choose to run the Bitcoin software on their computers. Think of this as just downloading an app that says, “I want to be part of this network”. These computers running.

This network creates “blocks” of transactions, and all of those node validate each block every ten minutes, leaving a trail of “blocks” behind. Hence, “blockchain”.

Worldwide, transactions are verified by those blocks every ten minutes. But, waiting ten minutes every time you want to complete a transaction, well it’s not hard to see how this could cause a major backlog of transactions. So, how do we make payments instant and still use Bitcoin?

The Lightning Network

Let’s try to make this easy. The elevator pitch for Lightning is “it’s a layer 2 on top of Bitcoin”.

Well, what the hell does that mean?

Layer 1 – Bitcoin. The base layer. This is the foundation of a currency. If you peel back all of the fancy companies and applications, where does the money start? It starts with the Bitcoin network we described earlier. It’s the completion of blocks and global users all agreeing on transactions once every ten minutes across the world. But as we mentioned, this isn’t fast enough.

Layer 2 – Imagine one of those computers (nodes) we mentioned earlier. Except, this node does not tell the Bitcoin network every transaction it does every ten minutes.

This Node creates “channels” or a connection to other nodes. It allows instant transfer of funds, and keeps track of all the transactions in order for everyone to get their money as soon as they want it. Important note, the user interface we built for you to use doesn’t require technical know-how of any kind. We handle the hard stuff; we just don’t have control over it.

When does the node send the information to the base layer (Bitcoin)? The moment a channel between two parties is closed. You could do three transactions, or 100. It doesn’t matter. All payments are accounted for, in the same way as if you were using the base layer the entire time.

This layer 2 node is called The Lightning Network. It keeps track of all transactions and makes sure that your funds are transferred instantly, so you never have to wait, and you still get to do it with the best currency humanity has ever known, bitcoin!