Diamond Hands releases “Understanding Lightning” report for a non-technical audience
I’m excited to announce that Diamond Hands community has released “Understanding Lightning” report.
This report was originally born in order to address a lack of an introductory and summarizing material for Lightning in Japanese. But I believe the content is helpful for a broader audience, so we have translated it into English as well and also invite other local communities to help us translate the report into other languages if possible.
Download the full report here.
In this report, we cover the mechanisms, use cases, and potential of the Lightning Network for a non-technical audience with a basic understanding of Bitcoin. In particular, we wrote this report in hopes of creating a practical introduction for decision makers at businesses interested in learning what integrating Lightning can do for them today, and in the future.
While we invite you to read the full report, here are some main points it covers:
The Lightning Network is a highly capable payment network built as a second layer (layer 2) atop Bitcoin, the most decentralized and secure blockchain in existence.
It has advantages over competing payments technologies and solutions including settlement speed, costs, and scalability, making it a prime candidate for integration at various businesses and protocols.
Lightning uses payment channels to process payments outside of the blockchain (“off-chain”) to overcome the issue of blockchain scalability.
In particular, Lightning features a routing network of nodes that forward payments, and competition among these nodes enables cheap fees and robust reliability. The necessity for trust is also mitigated with the use of HTLCs (Hash time lock contracts), which prevent routing nodes from stealing funds in transit, making Lightning payments secure.
The network has seen significant growth especially since 2021, with network capacity doubling and adoption increasing even faster.
Popular online businesses such as Cash App and Shopify accepting payments via Lightning, as well as governments such as El Salvador promoting the use of Bitcoin are major factors driving adoption, and as a consequence Lightning is far ahead of other layer 2 technologies in terms of real-world use. We expect this trend of user and payment volume growth to continue sustainably.
The low cost and instant settlement on Lightning has already given birth to a large number of novel applications.
Cheaper payments can bring financial inclusion to hundreds of millions of people, save users and businesses tens of billions of dollars, enable new user experiences and business models, or improve the capital efficiency of existing ones. Integrating Lightning also lets businesses tap into global markets, and the network effects of interoperable payments will make their services even more useful to the consumer.
The benefits of Lightning are not limited to simple payments. In addition to improving Bitcoin’s payment scalability, Lightning can enable stablecoin and token transfers, decentralized exchanges, and complex financial transactions using DLCs (Discreet Log Contracts), all in a highly scalable manner.
Micropayments in bitcoin can also help mitigate issues faced by the Internet today, such as the Big Tech stranglehold on user data, rampant censorship, and incentive misalignment in peer-to-peer protocols, and become a core piece of a better, more distributed Web.
About Diamond Hands
Diamond Hands is the largest Lightning community in Japan and Asia.
We aims to facilitate the international development and adoption of Lightning through the experimental operation of its routing node, a key technological component of the network, as well as through the development of useful products and provision of information and advisory to users and businesses.
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