Summary:
Lightning payments use smart contracts and payment channels to move bitcoin instantly between parties off-chain, settling only the final balance on the blockchain.
Details:
To make a Lightning payment, users open a channel by committing bitcoin to a multi-signature address. Within the channel, they can send and receive payments without delay. These off-chain transactions are enforced using hashed timelock contracts (HTLCs), which ensure conditional and trust-minimized transfers.
The payment can hop through multiple channels, reaching users who don’t have a direct connection, as long as there’s a route with sufficient liquidity. The channel is eventually closed, and the net result is recorded on the Bitcoin blockchain.
Key Features:
- Uses HTLCs to guarantee security and atomicity of payments.
- Channel-based structure enables rapid back-and-forth transfers.
- Only opening/closing transactions touch the blockchain.
- Enables third-party routing between users without direct channels.
- Instant refunds for failed or expired payments.