Before we dive in to exactly how to buy bitcoin on the Lightning Network, I want to dive in to a brief and high level explanation of what the Lightning Network is, and why it’s useful. If you are really just hoping for the step by step guide, click here!
What is the Lightning Network?
Bitcoin is uniquely positioned to be both a store of value and a payment network. Historically, we’ve only ever had one or the other. Gold/silver/oil as a store of value, and cash/bank tokens for easy of transacting. The logic was pretty simple, difficult to shave off the right amount of gold to buy a coffee, so use a medium of exchange instead.
Of course, centuries later we have completely evacuated the “store of value” concept, and think the medium of exchange is the store of value. We’ve even gone as far as to call the store of value units “investing”. The whole concept is backwards, but that’s a topic for another day.
Bitcoin enables us to have both. It is a store of value, mathematically programmed to store your value with a payment rail built in. The problem is, the payment rail is slow. There is some nuance that I can get into that actually shows you how much faster bitcoin is compared to visa/mastercard, they’ve just done a good job of hiding that to the end user.
Anyways, the Lightning Network was brought in to solve this problem for Bitcoin. It is essentially a secondary highway that is a only possible to get onto from the Bitcoin network. This means that transactions can settle instantly (literally instantly) with the designated Lightning Network (LN) nodes verifying the transaction in real time and requiring very little energy to do so.
How to use LN bitcoin
Custodial vs non-custodial Lightning Network environments
If you’ve been following me for any amount of time you’ll know that I advocate for self custody. We are a non-custodial bitcoin platform. We literally force our customers to take ownership of their bitcoin. It’s in our DNA. That said, as I’ve watched Bitcoin mature, and I’ve started to look at all the different ways people use bitcoin. As the network grows, the cost to send bitcoin (the main highway, if you will) goes up. Therefore, the need to use the secondary highway becomes more viable. In other words, the need to use the Lightning Network is growing.
Similar to Bitcoin, there is a custodial and a non-custodial way to use the Lightning Network. The tradeoffs are similar in that using the Lightning Network in a custodial environment carries more counter party risk (your money can be stolen much easier). However, if we equate our Lightning Network usage to that of a “spending account”, those risks might be manageable in the grand scheme of things.
I guess what I’m saying is, the technical requirements to use the Lightning Network in a non-custodial environment are heavy today. Similar to the technical requirements to use bitcoin in a non custodial environment in the early days. The difference between Lightning Network and bitcoin is that the purpose of the Lightning Network is to spend money. So, you should only keep the dollar value equivalent that is appropriate for your usage.
In other words, DO NOT LEAVE THE MAJORITY OF YOUR LIGHTNING NETWORK BITCOIN IN A CUSTODIAL WALLET.
How to buy LN bitcoin
With that disclaimer out of the way, you can deduce that if storing bitcoin on the Lightning Network is like the early days of Bitcoin, then buying bitcoin on the Lightning Network is like the early days. It’s tough. That said, like the early days of Bitcoin, the Lightning Network has a strong and growing ecosystem of builders who are committed to the cause.
For this example, we’re going to use Wallet of Satoshi. They call themselves the world’s simplest bitcoin lightning wallet; and they might be right. I’ve used Wallet of Satoshi since 2017. One of my first transactions was using the Lightning Network to play on a song on a bitcoin powered juke box we had at the office. It sends and receives bitcoin on the Lightning Network. But, it also does one other thing that is crucial to the topic-du-jour of buying bitcoin on the Lightning Network from Bitcoin Well…
It receives bitcoin (the same bitcoin you would buy with e-Transfer at bitcoinwell.com/app) and converts them into bitcoin on the Lightning Network. Similar to a on-ramp from a primary to a secondary highway, Wallet of Satoshi does the heavy lifting!
What this means, is that you can designate the bitcoin address from your Wallet of Satoshi app, and have them automatically converted to bitcoin on the Lightning Network. Just. Like. Magic.
Steps to buy bitcoin on the Lightning Network with e-Transfer
If you are in Canada, you are in luck. You can use the fastest and safest way to buy bitcoin, send them directly (and instantly) to your Wallet of Satoshi address, and receive bitcoin on the Lightning Network. Here is the exact walkthrough with a couple of pro tips:
Get your bitcoin address from Wallet of Satoshi:
- Download the Wallet of Satoshi app
- Click “receive” in the app
- Choose the “bitcoin” image (by default it will open to your lightning address)
- Copy your bitcoin address
Tap the receive button
Choose “bitcoin” and copy
Buy bitcoin, and send to Wallet of Satoshi
- Make and verify your account at bitcoinwell.com/app
- Go to the “buy” page and input your Wallet of Satoshi bitcoin address that you just copied
- Once you enter your bitcoin address, you will be able to see your e-Transfer details and be able to pick your blockchain broadcast preferences
- Send the e-Transfer from your bank and watch the magic happen
From the dashboard, tap “buy”
Paste your address and choose your mining fee preference
Once your e-Transfer is sent from the bank, Bitcoin Well will automatically send your bitcoin to your bitcoin address associated with your Wallet of Satoshi app, who will then automatically convert those bitcoin to the Lightning Network.
Confirmation that Bitcoin Well has received my money and will be sending my coins to the address I pasted
Bitcoin on the Lightning Network balance in Wallet of Satoshi
Transaction summary in Wallet of Satoshi showing $99 of the $100 sent as received (1% fee from Bitcoin Well)
Notably, this will cost 1% at Bitcoin Well and 1% at Wallet of Satoshi. So if you send $100, you will receive ~$98 equivalent in bitcoin. This is shown in my $3 balance turning into $101 in Wallet of Satoshi.
Please hear me when I say, Wallet of Satoshi is custodial. This means if they were to turn off their servers and never turn them back on, your bitcoin would be gone. Please take care and treat this wallet like the spending wallet it is intended to be.