This article will explore what the user experience of the Lightning Network will be like based on the solutions being developed by many smart minds today.
Compiled by: BTCStudy
Since its inception, the Lightning Network has grown a lot. Many optimizations have made the experience of Lightning payments smooth, but it is not seamless. The user experience today may not be far from our goal, but as developers, we hope to address this challenge: what do we need to do to improve the user experience?
In this article, we will explore what the user experience of the Lightning Network might look like based on the solutions being developed by many smart minds today.
We will first outline today's user experience and related pain points. Then, I will show the potential future of the Lightning Network with the help of technologies that are being implemented and actively developed.
What challenges will the Lightning Network face in 2023?
First, let's address the elephant in the room: today, a large number of transactions on the Lightning Network are completed through custodial wallets. Using the Lightning transactions that occur on the Nostr protocol as a rough estimate of the custodial users on the entire network, close to 90% of transactions are completed through applications where users need to trust a custodian to safeguard their private keys.
Why do most users currently choose custodial services? Because of the convenience, simple user experience, and the challenges of non-custodial Lightning wallets. We will divide these challenges into three main categories:
Technical Skills
If users are forced to take more actions than traditional payment methods to achieve the same goal, most users will lose interest. For example:
Users must stay connected to send and receive payments. Today, a major reason for failed Lightning payments is that the recipient is offline, occurring in about 0.5-1% of all Lightning payments.
Users must share invoices with each other outside the protocol (invoices), which is a cumbersome process involving sharing information through text, email, instant messaging tools, and so on, to initiate and request payments.
Users running their own Lightning nodes must be able to allocate Bitcoin between different channels. Opening a channel with an inactive peer may result in funds being underutilized.
- This is the opportunity cost of capital on the Lightning Network: if your capital is allocated to an unresponsive peer, these funds cannot be used to route payments (and generate revenue).
Technical Knowledge
These issues require users to have a deep understanding of the Lightning Network and/or unrelated protocols, which ordinary Lightning Network users may not pursue.
Setting up a Lightning node requires a certain level of technical ability. A Lightning node must always be online to maintain connections with the rest of the network.
- If a user's node goes offline, the Bitcoin in their channels may be lost or stolen.
A node operator must continuously balance liquidity between their channels; if there is no funding at your end of the channel, you cannot send payments, and conversely, if all the funds in the channel are at your end, you cannot receive payments.
In the event of a failed or stalled payment, the node operator must be proficient in using the command-line interface to resolve the issue.
Backing up a node is complex - node operators need to store their seed words and channel states, otherwise, existing channels may be closed if the connection is lost.
Technical Deficiencies
The Lightning Network's technology has not been fully deployed. Some technical issues still need to be addressed.
We do not yet have a standardized, user-friendly technology that can directly send payments to anyone without relying on centralized servers.
Examples include a unified QR code or an experience like paynym.
LNURL and Lightning address are options, but they also have drawbacks and still rely on someone running a server somewhere.
Because a Lightning node must always be online, the signing key must also be online. This creates comprehensive security risks.
The cost of opening and closing channels is directly related to on-chain transaction fees; during periods of high on-chain transaction demand, fees can rise rapidly, making channel switches expensive.
- To avoid this, users must establish channels before a surge in fees, although deciding when to open channels is not easy.
Privacy on the Lightning Network is not yet sufficient.
When you request a payment on the Lightning Network, you must expose some information, such as the node's IP address.
While senders (in general) have better privacy than receivers, they also expose some information during the transaction.
Based on the way Lightning nodes communicate with each other, third parties can easily determine the UTXOs related to their channel funding transactions on-chain. If such monitoring is carried out on a large scale, it could lead to the network being de-anonymized.
If most (not to mention all) of these issues can be resolved, what will the Lightning Network be like?
The Lightning Network user experience in 2025
Here, we want to emphasize the potential user experience of the Lightning Network after certain upgrades have been deployed in the future. This is not a specific roadmap, but a prediction of the possible user experience after certain upgrades have been deployed.
Channel splicing makes Lightning channels invisible to users
We expect that "channel splicing (splicing)" will be implemented on most Lightning wallets in the next few years, but what does this mean for network participants?
First, node operators will be able to add/remove funds to/from channels without excessive on-chain fees, without needing to close and reopen channels (meaning, they can maintain the normal operation of Lightning channels while adjusting their capacity). Because resetting channel capacity becomes cheaper, node operators - or automated software - will have better control over their channels, which in turn means a higher success rate for payments.
Lightning Service Providers (LSPs) can also benefit from reduced (channel splicing) costs and provide better user privacy. LSPs attempting to optimize user privacy can consolidate users' funds, batch process channel splicing transactions, and thus obfuscate the source of funds.
As channel splicing becomes more widespread, the migration of funds between the Lightning Network and the Bitcoin chain will become cheap and easy, and wallets will display a unified balance - because, for users, there will no longer be a need to distinguish between on-chain and off-chain funds.
During periods of high on-chain fees, LSPs can also manage user channels cheaply by combining splicing and atomic rebalancing on a sidechain (such as Liquid).
(Translator's note: The Phoenix mobile wallet already supports the channel splicing feature; their developers have detailed how this will improve the user experience in a blog post.)
Lightning Service Providers, Lowering the Barrier to Entry
In the visible future, LSPs may become a key component of the user experience, as they can help users hide complexity. Additionally, LSPs can reduce the capital requirements for operating a node; they can serve as gateways for users to enter the network.
The magic of the Lightning Network is its instant settlement capability, but failed payments and other pain points can weaken the user experience. Through infrastructure operated by LSPs, such as services and/or the nodes themselves, users can interact more directly with the Lightning Network. LSPs can eliminate the need for users to interact with the infrastructure by providing a "cloud-based node" mode, where users still control their funds but do not need to interact with the node. LSPs can also offer a "light" version of this service, consuming less power on mobile devices, or a combination of both modes.
If more capital moves to the Lightning Network, users must be able to restore their Lightning nodes (or Lightning wallets) in a way similar to on-chain wallets - for example, by entering a sequence of 12 or 24 words in the app. Service providers can allow users to store encrypted backups of their Lightning wallets in the cloud. Encrypted cloud backups can be easily imported into a new device if the user's device is damaged or compromised.
Eliminating Manual Operations
If someone has to take extra steps to benefit from Bitcoin (or any other magical technology), they are likely to give up on those steps.
There are currently issues that need solutions: LSPs can address the "keep online" requirement by receiving payments for offline users, making the user experience closer to existing payment solutions.
With Bitcoin developers receiving more funding support, more solutions will emerge to allow users to receive payments independently without using external services.
The payment IDs currently used, such as Lightning Address, are available but are supported by custodians almost all the time. Users need to be able to receive payments using reusable QR codes without relying on third parties. Reusability is crucial: copying, pasting, and sending invoices to the payer involve too many steps. If there is a simple solution, all Lightning Network users can benefit.
In the image above, the smaller, simpler QR code, called "offer," allows the wallet to handle the invoice request part of the payment process without user guidance. Another benefit of the offer is that it can carry information such as currency, vendor name, quantity limits, and the path to reach the recipient's wallet.
Many people prefer a simple onboarding process, which means they may prefer devices with trusted service providers. An example is the Fedimint protocol: a group of people managing something called an "e-cash mint." This model provides better privacy and a range of additional products and services, such as estate management, private mining pools, decentralized dispute resolution, synthetic dollar positions, and more. Because the Lightning Network is built into these communities, users can join and leave different alliances based on their judgment, and the migration cost is low.
Standardizing Privacy in the Lightning Network
To make privacy a standard feature of the Lightning Network, privacy-enhancing technologies must be able to operate invisibly, without the user seeing them - meaning users can benefit without taking any action. App developers and service providers must act behind the scenes, such as isolating on-chain transactions from Lightning transactions, and so on.
Disrupting Surveillance in the Lightning Network
Determining whether an on-chain transaction is a Lightning channel open/close transaction will become very difficult, as new technologies will increasingly make them look indistinguishable from other Bitcoin transactions. With more implementations of Taproot technology, features like signature aggregation can hide information about a payment channel and how many users may be involved in the transaction. (Translator's note: This is related to the introduction of Schnorr signatures in the Taproot upgrade, which, under certain conditions, can aggregate the signatures of both parties in a channel into one signature, making it difficult for external observers to distinguish this transaction from a regular individual wallet payment.)
If Taproot is widely implemented in wallets, users can gain better privacy when paying someone outside their peer nodes. Currently, such multi-hop payments have a payment ID (the hash value) that is known to every intermediate node on the forwarding path. However, some ways in which Taproot processes signatures can be used to create "dummy" payment IDs, allowing forwarding nodes on the path to see only a limited view, with only the sender and receiver having a clear understanding of the payment. (Translator's note: This is also related to Schnorr signatures, and the technology is called "PTLCs," where the information obtained at each hop is different.)
Lightning Network users may no longer need to worry - or even need to know - the specific path their payment takes, but currently, every node on the entire path can see where the payment originated (Translator's note: This should be a misunderstanding, as intermediate nodes do not know the payment's origin). In the "Canadian Freedom Convoy" incident, we can see that the government can and will seize funds, freeze fiat bank accounts, and scrutinize those who oppose them.
LSPs can anonymize the source of a Lightning transaction by providing a service as a blind routing intermediary. In this way, the LSP only knows the portion of the payment path it has constructed, while the sender knows the other parts; the intermediate nodes and the destination of the entire path are "blinded." This model will provide stronger security, and users do not need to be involved.
Using the Lightning Network as a Virtual Private Network
Wallets can creatively provide privacy-enhancing features. For example, wallets and LSPs can act as "invoice intermediaries" for users; the wallet creates an invoice and forwards it to an LSP, which then completes the payment. For the recipient, it looks like the LSP paid them, and by relying on this, the sender gains better privacy without changing their familiar payment process. Tony Giorgio, co-founder of Mutiny Wallet, points out that this method allows wallet users to hide among all users of this LSP.
A few Lightning Network users may want stronger privacy. Many cases of transaction mixing have been proven methods to enhance privacy, but this requires manual operation and may incur significant on-chain fees. Because LSPs already operate servers, they are in a favorable position to provide collaborative services for users to coordinate transactions. Service providers can create privacy-enhancing checkpoints: when users open or close channels, increase or decrease channel capacity (as mentioned in the "channel splicing" section above), or when users pay for goods or services.
Boosting E-commerce with the Lightning Network
Suppliers can use Lightning payments to offer a return period to customers. Customers can pay for a special invoice at checkout, retaining the ability to "revoke" the transaction until the goods and services are delivered. This was not possible before.
Security is Key for Institutional Adoption
To attract more institutions to the Lightning Network, it needs to be very easy to move funds from offline, cold wallets into a Lightning channel. Taproot channels have opened up this use case without sacrificing security.
Additionally, this allows institutions to safely store large amounts of funds on the Lightning Network. They will be able to use customized hardware to protect themselves from the risks of wallets being online.
Conclusion
The Lightning Network has proven its usefulness in instant settlement payments - but we should be clear that it is not without flaws. However, network participants can remain optimistic about addressing UX barriers; some of the smartest developers are tirelessly strengthening the user experience.
With more technical solutions emerging and more capital being invested in the Lightning Network, LSPs may play a larger role in helping end users remove complexity. Technological advancements will also benefit self-custody users and make the entire network closer to a "just works" experience.
There are many exciting things happening on the Lightning Network; all the predictions in this article about the future are based on solutions currently being developed. The more developers and businesses focus on optimizing the user experience, the more participants and capital will be involved, and everyone's user experience will improve.
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