Choosing a Bitcoin Lightning Wallet

Written by Lightning Pay

Updated: March 5, 2024

 

What is a Bitcoin Lightning Wallet?

A Bitcoin Lightning wallet is a software that allows you to transact and view your bitcoin balance on the Bitcoin Lightning network. 

These tools come in many shapes, sizes and flavours. Below, we do our best to discuss the various tradeoffs inherent to different kinds of wallets, and close with some general recommendations. Keep in mind, some of these will not be compatible with Lightning Pay Withdrawals.

Before we begin, because the fees for transactions on the Bitcoin Lightning network are generally inexpensive (with some caveats, see below), we encourage you to try out many of these tools to find out which is right for you.

Custody

Our first discussion revolves around an important theme for Bitcoin, custody. In general, there are two groups of wallets. First, a self-custody wallet is one in which you alone control the bitcoin you own, with 100% capacity to control the location and destination of your funds.

The second type is a custodial wallet. Much like a bank account, these wallets provide you a balance, and give you the ability to transact, but in reality, you simply have an account with a third-party, who ultimately controls the bitcoin.

Lastly, there is a new model of custody emerging that is interoperable with the lightning network. Technologies like Liquid, Cashu, and Fedimint offer a different model of custody, where the bitcoin is held in custody by either a single custodian, or a group of custodians, and you are given custody of another asset, generally representing the bitcoin held by the custodian. 

User Experience

Running the infrastructure for lightning payments yourself is complex. It involves managing a server, properly securing a hot wallet (always online), opening payment channels between counter parties, and managing liquidity. 

Lightning wallets are designed to remove this complexity to varying degrees. Custodial options do this the best at the moment, because giving the custodian full control of the infrastructure allows them to remove all of the complexity. 

But, there are a large number of options to choose from that have trade offs around user experience, and attempt to preserve self-custody for the user.

Below, we give 4 markers for UX in Bitcoin Lightning Wallets. 

  • Beginner - Wallets that are generally custodial, and maximise for an easy user experience. These are best for the user that is just getting started, and wants to explore with small amounts and learn the basics.
  • Intermediate - Generally these are non-custodial wallets, and will come with some user experience trade-offs. Best for the user who already has some knowledge about how Bitcoin works, and wants to try something with better security and privacy.
  • Advanced - Wallets are given this designation if they have more advanced features and UX options. Most will have an easy mode, so will be labelled as intermediate/advanced. These features include node management (if you are running one yourself), channel management, or multi-wallet support. Best for those who have a good degree of knowledge about Bitcoin and the Lightning Network.

 

Privacy

The privacy of your payments may be something you consider important in choosing a wallet provider. In general terms, the more control you give to the wallet software (custody, channel operation and liquidity), the less privacy you will have from the company or person offering you the service. In general, you should not expect the companies behind these wallets to be untrustworthy, but if privacy is a concern for you, take this into consideration.

We will give these designations for wallet privacy:

Better - The best in class wallets offer as much privacy as possible in a Bitcoin Lightning or Mobile application.

Good - These wallets offer a number of privacy related features, but do make some compromises in design to provide a better experience

Fair - Generally, custodial wallets must track every payment you make. In their design, it is difficult to offer a significant level of privacy.

 

Costs and Fees

While the fees for payments on the Lightning Network are generally very inexpensive, because the Lightning Network is tied to Bitcoin Network transactions, costs can still be a consideration, depending on the wallet you choose.

Normal transaction fees for regular payments in almost every wallet will be inconsequential. However, if you are using a wallet that tries to keep as much control in the user's hands as possible, you may encounter costs when your payment channels do not have the liquidity required to make the requested payment.

We will note those where the user must be aware of the fees that may come from channels being opened to their self-custody wallet. Generally, all self custody wallets will come with added fees, but the hybrid wallets can lower this to some degree.

 

Wallet Breakdown

Beginner Wallets - Wallets that are generally custodial, and maximise for an easy user experience. These are best for the user that is just getting started, and wants to explore with small amounts and learn the basics.

 

Intermediate - Generally these are non-custodial wallets, and will come with some user experience trade-offs. Best for the user who already has some knowledge about how Bitcoin works, and wants to try something with better security and privacy.

 

 

Advanced - Wallets are given this designation if they have more advanced features and UX options. Most will have an easy mode, so will be labelled as intermediate/advanced. These features include node management (if you are running one yourself), channel management, or multi-wallet support. Best for those who have a good degree of knowledge about Bitcoin and the Lightning Network.

 

Conclusion

The list above contains only the most popular Bitcoin Lightning Wallets available, there are many more to choose from, and an endless number of options. Luckily, with fees so low, there is no harm in giving a new wallet a try to find your preference.

There are new technologies and features being added to wallets regularly. We will do our best to keep this article up to date, but things move fast in Bitcoin. Lastly, be sure to check out our “Supported Wallets” article, as some of these wallets won’t be compatible with Lightning Network withdrawals on Lightning Pay.