Lightning Network

The Lightning Network is a layer-2 payment network for Bitcoin. Two parties lock bitcoin into a shared on-chain address to open a payment channel. They can then send payments back and forth instantly by updating a balance sheet that both sign, and only open and close transactions are recorded on the blockchain.

Payments can hop across a network of connected channels, so you can pay someone you have no direct channel with. This makes small payments of a few satoshis practical, with fees that are usually tiny and settlement in seconds.

The trade-offs: your wallet or a service needs to be online to receive, channels need enough liquidity in the right direction, and fully self-managed Lightning is more complex than an ordinary bitcoin wallet. Many popular Lightning wallets are custodial, which reintroduces counterparty risk.