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How to open a Bitcoin payment channel on the Lightning Network

Is the next question right or wrong? Wait for 10 minutes for Bitcoin transactions. The answer? The error is due to Lightning Network technology.

If you want to transfer or receive Bitcoin in seconds, you need to set up a Lightning payment channel. This is not difficult, but first let’s look at some basic details.

Why create a Lightning Network?

The Lightning Network aims to solve the Bitcoin expansion problem. Bitcoin transactions on the Bitcoin network have never been faster. The Bitcoin blockchain can only process 7 transactions per second. Instead, credit card authentication systems process thousands of transactions per second.

In order to make bitcoin equal to the daily use of credit cards, payment time is greatly reduced. This is where the Lightning Network comes into play.

What is the Lightning Network?

The Lightning Network adds another layer to the Bitcoin blockchain. This is the Bitcoin payment channel at the top of the blockchain. Both parties must agree to launch Bitcoin through this payment channel. They can then buy and sell BTC between each other until the quantity is available or the trading term expires. They can start any number of transactions. But it all started with launching a single payment channel.

Therefore, you can set it up in a few steps.

Step 1: Create a Lightning Network wallet

You and the partner you want to trade with need to set up a wallet that supports Lightning Network mode as a Bitcoin payment channel. There are several such solutions, including Breez, Peach Wallet, and Satoshi’s Wallet.

Think of the Lightning Network wallet as a multi-signature wallet that you and your partner share with each other. You must all “sign” the wallet and provide your own private key.

It is important to note that transactions in Lightning Web Wallet have not been verified by the blockchain. Several multi-signature wallets are still under development, so we recommend that you keep only the minimum amount of Bitcoins (minimum) required for transactions.

Step 2: Start trading

Once you and the other party have replenished the balance with the private key, you can start trading. It works as follows:

Both of you agree to provide a product or service, one of which will be paid in Bitcoin. For example: You both have 4-4 BTC in your wallet and you want to buy Daniel’s car for 1 BTC.
Therefore, you transferred 1 bitcoin ownership to Daniel. Therefore, you and Daniel agree to use your private key to verify the updated balance. Since both of you started with 4-4 BTC, your balance will now be 3 BTC, and Daniel’s balance will be 5 BTC. Each transaction has a time limit called a “time lock”. Once expired, the transferred bitcoins will not be refunded.
Repeat this activity as needed. You and the other party can initiate any number of transactions, and the transaction will be completed in seconds.

Step 3: Close the channel and collect available resources

If you and the other party think you have completed the transaction, you agree to close the channel. In our case, if the only transaction was a car purchase, put 3 BTC back into the private wallet, and Daniel put 5 BTC back into his wallet-of course, the transaction fee will be deducted. Of course, just like your original deposit, in multiple signed wallets, these private wallet transactions will be verified on the blockchain.

Simple setup and simple payment process

The Lightning Network wallet app makes connecting easy, all you need to do is scan a QR code, make a payment or receive a payment and continue your day. Once you have installed one of Breez, Peach Wallet or Satoshi’s Wallet app, you just need to replenish your balance and the app will guide you through the process. Of course, there are several Lightning wallets on the market (list is as follows: https://lightningnetworkstores.com/wallets), and their development status is different, so it is necessary to know exactly at what stage they are. The app then connects with other users and you can buy products or services in exchange for Bitcoin.

Here you can test if your channel is normal🙂

Source: Compiled from BITCOINBAZIS by 0x. Copyright belongs to the author and may not be reproduced without permission

0X Simplified Chinese Version: How to Open Bitcoin Payment Channels on Lightning Network

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