The Bitcoin base layer can only handle about 8 transactions per second. This is not enough for the whole world to use the base layer to make small purchases. Instead, the Bitcoin blockchain, with its limited real estate, can act as a final settlement layer while smaller transactions can be performed on a second layer built on top of Bitcoin.

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The Bitcoin Lightning Network is a second-layer protocol designed to facilitate faster and cheaper transactions by enabling off-chain payment channels. Unlike on-chain Bitcoin transactions, which require block confirmations and can be slow and costly during periods of high network congestion, Lightning allows users to transact instantly by locking funds into bidirectional payment channels. These channels can route payments through a network of interconnected nodes, reducing reliance on the base layer while maintaining Bitcoin's security and decentralization. Settlement occurs on-chain only when channels are closed, optimizing scalability without altering Bitcoin’s fundamental consensus rules.

While Lightning is the predominantly accepted method of scaling Bitcoin transactions beyond the base layer, other services also exist. eCash services like Bitcoin Fedimints and Cashu are federated Chaumian e-cash systems that enable fast, private, and scalable Bitcoin transactions off-chain. Fedimint is a federated custody model where a group of guardians collectively manage Bitcoin-backed eCash, allowing users to transact privately without requiring self-custody or direct interaction with the base layer. Cashu is a similar Chaumian e-cash implementation but designed for more flexible, lightweight usage, often integrating with the Lightning Network. Both systems provide near-instant, anonymous transactions using blinded signatures, making them useful for communities, micropayments, and privacy-conscious users while ultimately settling on Bitcoin when needed.

If you'd like to do a deep dive, visit The LND GitHub to learn about the LND implimentation of the Lightning Network. Or you can, visit The Cashu Site to see a host of different utilities that all use the Nostr protocol.