What is the Lightning Network?

The Lightning Network is a Bitcoin Layer 2 payment network that enables instant, low-cost transactions. While Trezor doesn't directly support Lightning, you can use Lightning safely by sending small amounts from your Trezor to a mobile Lightning wallet for everyday spending.

What is the Lightning Network?

The Lightning Network is a Bitcoin Layer 2 payment network. It works around the Bitcoin network's limited capacity by processing transactions off the main blockchain.

Bitcoin's main blockchain confirms batches of transactions (called blocks) every 10 minutes on average. Each block has a fixed limited capacity, which means users have to bid against each other with fees to get their transactions included. This makes confirmation times unpredictable. Your transaction could be in the next block or take much longer. During high network activity, this causes transactions to become slow and expensive.

The Lightning Network solves this by handling transactions off-chain. It can theoretically process millions of transactions per second with near-zero fees.

The Lightning Network launched in 2018. Since then it has grown significantly. Today the network processes over 8 million transactions monthly. It's being used for everyday purchases, cross-border remittances, social media tipping, and micropayments.

How does Lightning Network work?

Lightning works through payment channels. Two parties open a channel by locking bitcoin in a shared address. They can then make unlimited instant transactions within that channel. Only the opening and closing of the channel are recorded on Bitcoin's blockchain.

These channels connect to form a network, allowing you to send payments to anyone on Lightning, even without a direct channel to them.

Think of it like opening a tab at a coffee shop. Instead of paying for each coffee separately, you settle the total when you're done. Lightning works the same way. Only the final balance is recorded on the Bitcoin blockchain.

Modern Lightning wallets handle all this complexity automatically. You simply send and receive using invoices, addresses, and QR codes.

Can you use Lightning Network with Trezor?

Trezor cannot directly manage Lightning Network funds. That’s because Lightning and hardware wallets have a fundamental incompatibility.

Lightning requires a node to stay online 24/7 to monitor channels. This means Lightning needs "hot" private keys that stay connected to the internet. Trezor keeps your keys offline for maximum security. These requirements are incompatible.

However, Trezor can send bitcoin to third-party Lightning wallets and receive bitcoin back from them. These are standard on-chain transactions.

Recommended Lightning wallets

• Phoenix Wallet - Phoenix is a self-custodial Lightning wallet with automatic channel management. You control your funds, and the wallet handles all technical operations.
• Breez - Another excellent self-custodial option with additional features.
• Wallet of Satoshi - The easiest option, but custodial (the company holds your keys).

Key takeaways

The Lightning Network makes Bitcoin practical for everyday payments with instant transactions and near-zero fees.

Trezor cannot directly manage Lightning funds because Lightning requires online "hot" keys while Trezor keeps your keys offline for security.

Use Lightning safely alongside your Trezor: keep savings on your Trezor, send small amounts to a Lightning wallet for daily spending.

Recommended wallets: Phoenix or Breez for self-custodial control, or Wallet of Satoshi for testing with very small amounts.

Only keep on Lightning what you'd keep in a physical wallet. Everything else stays on your Trezor.