Bitcoin Lightning for users
This post is also available in: German
So you can use Bitcoin Lightning.
This article is intended for users who want to pay via Bitcoin Lightning. An attempt is made to avoid technical aspects as far as possible, as the user is in the foreground in the description.
Bitcoin Lightning is not a new coin, token or cryptocurrency. Lightning is an extension of Bitcoin to make payments faster, cheaper and more anonymous.
Difference between Bitcoin and Lightning
The operator of a coffee shop also does not bring the cash amount to the bank individually after the sale of each coffee, so that every single transaction appears on his bank statement.
At the end of the day, he brings all the daily turnover to the bank and records it in aggregate on the bank statement. He recorded the individual transactions of the day in a separate cash register on the page (sidechain).
So does every coffee sold individually have to be logged in the blockchain and recorded as a copy on every node worldwide for eternity? What is a user in Japan interested in if I paid for a coffee in Germany.
The Bitcoin Lightning network is supposed to provide a remedy. The idea is that not all transactions are recorded on the Bitcoin Blockchain anymore. Especially in low-value transactions (mictro transactions), for example the purchase of a coffee, it is not necessary to record the transaction on the Bitcoin Blockchain.
With the Bitcoin Lightning network, it will be possible to carry out transactions on separate chains (sidechain) outside the Bitcoin Blockchain.
As with the example of the coffee shop, or with sub-accounts in the accounting, only the initial and final stock of the channels are recorded in the Blockchain.
Bitcoin Lightning is predestined for payments of small amounts, the so-called microtransaction. Payments for the equivalent of a few microcents can be made cheaply and instantly.
Be it for coffee around the corner or for a single newspaper article on the Internet. Due to the previous payment methods (credit card, bank transfer, PayPal etc.) or as a pure Bitcoin transaction (expensive, slow) could not be implemented until now, can now be realized with Bitcoin Lightning.
In order to better understand the topic, it is best to try Lightning yourself as a user.
To have our own Lightning experience, we use three steps:
- Lightning Manage,
- Lightning Get and
- Lightning Use
Lightning Manage – The Lightning Wallet
Why do I need a Lightning Wallet?
We know the euro in various forms. Once as a virtual balance in our bank account and in the form of paper and coins in our wallet.
While we pay our larger expenses and bills by bank transfer, which takes 1-2 bank working days to be credited to the recipient, we use cash for our daily expenses. We use cash to pay small amounts quickly and anonymously in the store.
Transferred to Bitcoin, Lightning is the digital cash that can be used for payments of small amounts (micro and nano payments), quickly, cheaply and anonymously.
Lightning is the digital cash
With the help of an ATM, I transfer euros from my bank account to my wallet.
Accordingly, I also use Bitcoin and Lightning. Again, I need to transfer my Bitcoin to Lightning to manage it in a Lightning-enabled wallet.
What should a Lightning Wallet be able to do?
The first step is to create a wallet where we can manage and use Lightning.
Bitcoin has the motto, “Not your keys, not your bitcoin”. At Lightning, we’ll deviate from the rule to be easy to use.
We can do this because only a small amount is stored in a Lightning Wallet.
We need to be aware that Lightning is still in an experimental stage and there may be a total loss of Lightning’s balance at any time. That’s why we only keep an amount in Lightning that we can easily lose.
Custodial and Non-Custodial Wallets.
In the form of the wallet, we distinguish between Custodial and Non-Custodial Wallets.
Custodial can be translated in that a third party takes care of my credit in a fiduciary capacity.
You only have indirect access to the credit.
A non-custodial wallet offers greater security, as only I can dispose of it myself. Sometimes the term Self-Custodial is chosen instead of Non-Custodial. The translation of Self-Custodial means self-preservation and describes the situation better.
- Non-Custodial / Self-Custodial = Self-custody
- Custodial = Foreign Custody
However, using a non-custodial wallet requires (mostly) that you have to run your own Lightning Node.
Running your own Lightning Node makes sense if you want to accept Lightning payments in your shop as a merchant. As a user, however, we want to send payments or receive payments with a Lightning Wallet, so a Custodial Wallet is a suitable solution.
Since we do not currently operate our own Lightning Node, we will consider custodial solutions below.
With the Custodial solution, we entrust our Lightning balance to an external entity, for which we gain simplicity and ease of use.
If we’ve become familiar with the lightning issue and want to manage for higher amounts in Lightning, we’ll be free to switch to a non-custodial wallet at any time.
Mobile Lightning Wallet
There is a further subdivision according to the type of wallet or on which platform we want to use the Lightning Wallet. Since we put the application as a user in the foreground at this point, only the user-friendly wallets that run as an app on my smartphone look at here.
The most well-known non-custodial wallets for the smartphone (iOS & Android) are:
- Wallet of Satoshi
- Breez Wallet
- Phoenix Wallet
You can find a detailed guide to the respective wallets behind the links.
Otherwise, you can find more information about Lightning Wallets here
A good German-language guide as A YouTube video is available from CryptoMonday to BlueWallet
Lightning Payments Received
A special feature of Lightning is that you have to create an invoice beforehand to receive Lightning.
In doing so, the payee generates a kind of payment request to the payer.
This payment request includes the amount and the recipient address. Thus, the recipient of a Lightning payment can uniquely assign that payment.
A Lightning Invoice can be seen by the fact that it starts with ln and looks something like this:
Of course, this Invoice can also be displayed as QR
And can be easily scanned by the payer.
If you’ve had experience with wallets, you won’t have any problems with The Lightning Wallets.
The main difference is that these wallets manage separate accounts for Bitcoin and Lightning. It is easy to switch between these accounts.
In the meantime, however, there are also wallets such as the Phoenix Wallet and the Breez Wallet, which no longer make these distinctions. The user can then not care. The wallet independently detects whether it is a Lightning invoice or a normal Bitcoin payment.
The balance in the wallet is usually shown in Satoshi. Satoshi is the smallest bitcoin unit and 100,000 Satoshi are 0.001 Bitcoin. With a bitcoin price of €10,000,- 100,000 Satoshi would be approx. €10,-
This classification is useful because Lightning is used specifically for the use of small amounts and these are mainly expressed in Satoshi.
Use – Application Examples for Lightning
If you now have a few Satoshi on your Lightning Wallet, you should also use them, i.e. pay for it.
There are three main features for paying with Lightning:
- fast – is executed instant and thus immediately (< 1 second) credited to the receiver
- cheap – a transaction costs less than 1 cent
- anonymous — Only opening and closing a Lightning Channel is visible on the blockchain. Each Lightning transaction within each Lightning Channel is anonymous.
Thus, Lightning payments are predestined for so-called micropayments. In theory, products can be billed for 1 Satoshi, which would be equivalent to well under a cent.
With the previous payment methods such as credit card, PayPal or bank transfers, payments of very small amounts cannot be made. The cost of such payments is not in a reasonable relationship with the revenue to be generated.
With Lightning, business models can be realized that have been unthinkable with the previous payment methods.
With Lightning, users can pay per item, download, video second, or temporary website access.
In the following, let’s take a look at a few examples of applications in detail.
Lightning conferences are popular with slot machines that can be paid for by Lightning.
A special highlight at the Lightning Conference 2019 in Berlin was a cocktail vending machine where you could pay with Lightning. There were also beer taps or vending machines where sweets could be bought.
A product selection can be made at the vending machines. A QR code was then displayed. After successful payment, the beer or cocktail was provided.
The following Twitter message shows a video of how a drink is paid for by Lightning at the cocktail vending machine.
The delivery of the products was possible after a few seconds.
Unlike a Bitcoin payment, it is not necessary to wait for a confirmation in the next block or to worry about the amount of the transaction fee.
This fun application shows that at the vending machines, where cash is still paid today, you can pay by lightning with simple technical means. But not only for vending machines for drinks, sweets or cigarettes.
How comfortable would it be if you could pay for your ticket for the bus and train or your parking ticket in this way?
Lightning can be implemented for vending machines where the user pre-registers via an app. A customer no longer has to disclose personal and bank details and the operator receives a guaranteed payment.
You will find an interesting article, but before you can read it, you have to register and sign up for a subscription.
Why do I need to sign up for an online subscription if I only want to read a specific article?
Many customers are aware of the problem. One finds an interesting article, which is either framed by annoying banner advertisements or hidden behind a paywall or payment barrier. In order to pass the payment barrier, an expensive monthly subscription must be concluded. Even free trial subscriptions require registration with the disclosure of personal data.
With Lightning, newspaper articles can be offered for a few cents. The reader does not have to register, but executes the payment with one click and can read the article without interruption to the end.
An example can be provided on the paywall.link page. Here you can hide your own page behind a paywall. When the reader pays the amount, the content is displayed.
For demo purposes, this page was deposited for 100 Satoshi. If you pay 100 Satoshi via Lightning, you will get to this page.
If you want to try it out, go to the following page:
Payment for digital data such as pictures, photos or videos
As with newspaper articles, videos, software, images or audio can sell files individually.
Instead of uploading a training video or a music clip to YouTube for free to participate in the advertising revenue, the videos can be offered for a few cents.
These files can be billed per downlaod. But also models, in which according to the duration of use (per video second), can be implemented.
In the pay-per-view model, the customer is shown a preview image. If the customer has paid by Lightning, they will immediately gain access to the file or can watch the video.
By selling individual files for a few cents, manufacturers and digital content vendors can generate new revenue streams.
Instead of relying solely on advertising revenue from online advertising platforms, digital content providers can focus more on the wishes of their own customers.
Donate, Tip, Tippins
YouTubers, bloggers and news site operators and forums offer free information on the Internet. In order to support this work financially, you can also give a tip.
A tip of a few cents up to a few euros can be granted with one click via Lightning.
A payment page or a donation button is created with just a few clicks and can be integrated as a link or via HTML to your own page.
With Tippin.me, the user can include a donation button on his own website or get financial support for special tweets via Twitter.
In the gamer scene, it is also common for players to receive financial support from their supporters. Money can be donated on the popular gaming portals.
However, micro-payments are becoming increasingly important not only as a donation, but also in the form of in-game payments.
The games are offered as a free version and for a few cents new features can be purchased or the appearance can be changed.
Currently, each game provider has its own solution and is in a closed area. Lightning breaks the boundaries.
Lightnite can pay with in the game with Lightning and also receive Lightning payments.
Where can I pay with Lightning?
For a list of retailers where you can pay with Lightning, see Coinpages Lightning Acceptance Points
This post is also available in: German