22/05/2023
The Lightning Network is a second-layer protocol for scaling Bitcoin that utilizes smart contracts. It was launched back in 2015. The main feature of Lightning is fast and cheap microtransactions.
The protocol uses payment channels between parties to facilitate the transfer of BTC. Anyone can open a payment channel if they have a certain amount of coins (the threshold is set when opening the channel).
Through an open channel, users can send Bitcoin directly to each other unlimited times without recording each transaction separately on the blockchain. Information about the final balance is only sent after the channel is closed (along with the payment of fees). Additionally, the Lightning Network functions as a router, transferring assets through a chain of intermediaries, not just between two parties.
Over 5400 BTC is currently locked up in Lightning, which is constantly growing.
One drawback is the channel's capacity (you can only send up to the locked-up amount). As a result, Lightning may not suit you if you regularly send large amounts of Bitcoin, and you would be better off using the main blockchain.
Recently, Lightning Labs released Taproot Assets v0.2 (formerly known as Taro) for launching assets on the test net. This development indicates the potential to see an ecosystem within the Lightning Network soon, including the introduction of stablecoins, as promised by the developers.