How Bitcoin Lightning Works
Explaining the Bitcoin Lightning Network with “The Airport Analogy”
I was recently on a panel at the Bitcoin Collective Conference in Edinburgh to talk about the Bitcoin Lightning Network and how it works.
Usually when people try to explain Bitcoin and the Lightning Network, it goes something along the lines of…
“The Lightning Network is a Layer 2 technology built on top of Bitcoin to allow for instantaneous and almost free Bitcoin transactions.”
But as with all new technology, it can be incredibly hard to explain what’s actually happening, without getting too complex. This got me thinking about Bitcoin education and how to ELI5 (Explain Like I’m 5) with Bitcoin Lightning, enter…
Bitcoin Lightning: The Airport Analogy
Airport = Bitcoin/Lightning node
Route = Lightning channel
Airplane = Channel capacity
Passengers = Bitcoin
Let’s pretend the airport is our Bitcoin and Lightning node — it’s the hub that “controls” the routes, airplanes and passengers.
Channels
When the airport wants to create a new route — let’s say the Isle of Man to Amsterdam — the airports will communicate and come to an agreement (contract) for the route. This is essentially the “smart contract” piece of Bitcoin creating a Lightning channel.
Routing
Airports don’t need to be directly connected to allow a passenger to travel from one destination to another — I can’t fly directly from the Isle of Man to New York, but I can fly from the Isle of Man to London, and then from London to New York — I can take different routes in order to get to where I need to be. This is what happens when paying over the Lightning Network.
Liquidity
So, let’s say we’re flying from the Isle of Man to London and the plane can carry 50 passengers. If each passenger is a Bitcoin, then this means the Isle of Man has 50 outbound capacity and London has 50 inbound capacity.
The plane leaves the Isle of Man and lands in London with 50 passengers. That plane is now at London airport with 50 seats available to fly back to the Isle of Man, so London now has capacity for 50 outbound and the Isle of Man has capacity for 50 inbound.
Multi-path payments
It even helps to show how multi-path payments work: 50 passengers could be travelling from New York to Tokyo, but are not able to travel direct because there is no route with availability. However, 30 passengers may fly from New York to London and then to Tokyo, and the other 20 passengers may fly from New York to Barcelona and then to Tokyo.
All 50 passengers started in New York and arrived in Tokyo, but just took different routes.
Closing channels
When an airport decides to end a route, they allow one last flight to come in with 50 passengers. These passengers then exit the airport for the last time for this route — this is like Bitcoin exiting the Lightning Network and back on-chain (entering the world outside the airport).
Hopefully this helps make sense of how the Bitcoin Lightning Network operationally functions — using a real world example that kind of fits and is easier to understand.
P.S. If I stole this analogy from someone, I’m sorry! It’s one I’ve always had in my head but I’ve never really shared.
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