At Lightning Pay we really like the Lightning Network (as if you couldn’t tell by the name!). But what exactly IS Bitcoin’s first and best second layer network? And why do we like it so much? 

In this week’s newsletter we get our head out of the clouds when it comes to the fastest way to send sats. 

What is the Lightning Network?

The Lightning Network was proposed in 2015 by Joseph Poon and Thaddeus Dryja and went live in 2018. It is a layer built on top of Bitcoin that lets people transact instantly and cheaply without every payment needing to be recorded on the blockchain.

Fundamentally, Lightning is comprised of Nodes (just like Bitcoin) and Channels between those nodes to connect them. These nodes can exchange thousands of small payments off chain, and then settle the final balance back on chain when they are finished. 

A payer’s sats might be sent over multiple channels between nodes. This is called “routing”. This allows you to send money to a person that you might not even be directly connected to, thanks to the network’s ability find the shortest path between two nodes. 

Lightning is what’s considered a Layer 2, or L2. That is, it’s a network built on top of Bitcoin’s base layer. The base layer (Layer 1) is where the strongest security and final settlement happen, but it is limited in speed and capacity. An L2 like Lightning inherits the security of Bitcoin while handling transactions off chain, where they can be faster, cheaper, and more flexible. Once users are done transacting, the final balance can be settled back to the main chain. This combination lets Bitcoin scale for everyday use without sacrificing the trust and durability of the base protocol.

But What Is It For? 

Lightning fills a useful niche in the Bitcoin ecosystem. Bitcoin’s base layer is very secure but limited in throughput. Blocks are mined every ten minutes and space is scarce. This makes small payments impractical on chain.

Lightning solves this by moving transactions off chain while still relying on Bitcoin’s security when channels are opened and closed. This means:

• Faster payments

• Lower fees

• More scalability

• New use cases like micropayments, streaming payments, and tipping

Lightning makes for the perfect payments system for shops because it’s so fast and cheap. That’s why at Lightning Pay, we built our Merchant Services solution on Lightning.

But it’s also starting to show up in some other interesting places where small, consistent payments are useful. Mining Pools like Braiins, and Ocean both support mining payouts on Lightning. Braiins averages 1,000 payments a day over Lightning.

Close up of the hyper-connectivity of Lightning Network Nodes

Lightning Is On the Up

Public Lightning capacity grew more than 400% between 2020 and 2023, peaking at over 5,400 BTC, before settling back closer to 4,200 BTC in mid-2025. But in USD the capacity of Lightning is trending up - to nearly $500 million. More capacity means more and larger payments can make their way through the network. Back in 2018, routing success was very low, often under 50%, and the max payment size was about $490. At Lightning Pay we can easily send more than $10,000NZD in a single go.

In 2025 payment volume continues to rise. More businesses and services are adding Lightning support, and payments through Lightning processors are growing year over year. In Q1 of 2025 it’s estimated that more than 100 million transactions were sent over Lightning. That’s 28% higher than the year before!

The acceptance of Lightning by retailers has increased 70% year on year in 2025. This is driven by some large companies in the US using the technology - including a 100 store pilot by Walmart and a similar experiment by Starbucks. Oh, and Lightning Pay of course… 

Lightning Network capacity is trending up over time in FIAT terms.

The Bigger Picture

Lightning is more than just faster Bitcoin. It makes Bitcoin usable in everyday life. It gives people the option to send a few cents as easily as hundreds of dollars. It makes small-scale commerce possible, and it offers resilience when on-chain fees are high.

That’s why we love it at Lightning Pay and built New Zealand’s first and only Lightning native exchange!

What it means for you

If you are already using Lightning, the network is becoming more reliable and better connected. If you are new, wallets and services now make it simple to try. For developers and businesses, Lightning opens opportunities to build new services that were never practical on the base chain.

Check out our guides and articles at Lightning Pay Learn for more information on how you can learn to love the Lightning!