What Bitcoin protocol layer enables fast, low-cost payments through off-chain channels?

The Lightning Network enables fast, low-cost Bitcoin payments through off-chain payment channels.

It is a layer-two system built on top of Bitcoin. Users can open payment channels, conduct multiple transactions without recording each one individually on the Bitcoin blockchain, and later settle the channel’s final state on-chain. This design reduces the need for every small payment to wait for block confirmation.

The network uses bidirectional channels and hashed timelock contracts to support payments across interconnected channels. Participants can route payments through the network without requiring a direct channel with every recipient. Bitcoin’s underlying blockchain remains responsible for opening, closing, and enforcing channel transactions.

Lightning is not a replacement blockchain with a separate native coin. It uses bitcoin, commonly represented as BTC, and depends on Bitcoin’s settlement layer. It is also distinct from Bitcoin sidechains, which use separate blockchains. The network was proposed in a 2015 paper by Joseph Poon and Thaddeus Dryja and later implemented by multiple development teams.