Essentially the lightning network takes Bitcoin off the bitcoin blockchain and enables it to be exchanged, securely and efficiently, between parties without having to always verify it directly into the blocks that form the Bitcoin chain. By doing this, it is able to almost instantaneously conduct transactions at virtually no cost between people who have lightning wallets. This solves three of Bitcoin’s perennial problems: scalability, transaction cost and speed. Eventually the Lightning transactions are put back onto the block chain but this is done at a later date and only when the participants wish so to do.
Lightning Wallets
There are number of lightning wallets, both custodial and non-custodial. To put it very simply, with a custodial wallet you do not have complete control over your assets – just as you don’t in a bank.. you are trusting a third-party service provider. However, with a non-custodial wallet you control everything. However, the assets are your responsibility! If you lose the keys/backup phrase you will lose your assets.
PHOENIX – A Non-Custodial Wallet
The phoenix wallet is a fairly intuitive wallet that is non-custodial and functions well. It also has a QR function that allows you to conveniently send and receive Bitcoin.
To install Phoenix Wallet for Lightning:
- https://phoenix.acinq.co/
- Press download and then install and finally open.
- You will come to the Welcome page.
- Press Next. It will take you to an Automatic Channel Creation page.
- Read the information and press next..
- You will be taken to a page that gives you your current balance (0 satoshi) and asks you to ‘Backup My Wallet’.
- Press the ‘Backup My Wallet’ button and carefully read the instructions,
- then press ‘Display Key’.
- The next page is important. It will generate your seed phrase. You must write this down and keep it securely. If you lose it, you lose your assets. THERE IS NO WAY TO RECOVER THEM.
- You now need to put some funds in your wallet to start using it. Press the receive button, a QR code will be generated, you can share the payment request on media, copy it to the clipboard or show a bitcoin address. Initially you will need to fund it from your store of bitcoin from your custodial wallet, or from a bitcoin meetup where someone can send it to you and you can give them fiat.
- Copy the address and send a small amount to begin with, it takes a bit of getting used to. Get a friend to make a wallet and start sending and receiving small amounts to familiarize yourself with the wallet. Once you have opened channels the charges are negligible, initially they can be a little expensive, around 1 percent or more if it is a small amount and you do it from the bitcoin chain. Once the bitcoin is on the lightning network it is very cheap indeed to send and receive bitcoin.
Enjoy your new freedom to move bitcoin around, but don’t lose your seed phrase/ keys!!!
