This article provides a straightforward guide to three primary Bitcoin transaction types available to you in the Blink bitcoin and Lightning wallet: on-chain addresses, lightning invoices, and Paycodes (also known as LNURL-pay QR codes).
When you receive bitcoin to Blink, you can choose between three payment methods: Lightning, Paycode and On-chain. This article will help provide a clear understanding of the benefits and limitations of these methods and the different payment scenarios each is best suited for.
These are traditional Bitcoin addresses for making payments on “layer 1” or the base layer of Bitcoin. They begin with a 1, 3, or bc1, and represent the destination where you send or receive Bitcoin.
When you make an on-chain transaction, that transaction is recorded on the Bitcoin blockchain which is a publicly viewable ledger distributed across tens of thousands of nodes around the world. Because each transaction is recorded to the blockchain, it is typically more expensive and takes longer to settle an on-chain payment than a payment on the Lightning Network.
On-chain transactions are well suited for larger amounts where security is of utmost importance. For instance when you send your bitcoin to cold storage, you do so using an on-chain address for which you hold the private keys.
Lightning Invoices are part of the Lightning Network, often referred to as "layer 2" of Bitcoin. This system facilitates faster and cheaper transactions, especially ideal for smaller amounts.
A Lightning invoice is a QR code (or string of text) that a payer scans to send bitcoin. Lightning invoices are one-time use, so receivers must create a new invoice for each incoming payment.
Lightning invoices are particularly apt for everyday small transactions, like buying a coffee or paying a friend back for lunch.
A useful development for the Lightning payment experience, LNURL Pay QR Codes offer a reusable method of receiving Bitcoin. Rather than the traditional single-use invoice, these QR codes can be scanned multiple times for multiple payments.
Using LNURL Paycodes eliminates the need to generate new invoices for each transaction, merging the simplicity of on-chain transactions with the benefits of the Lightning Network. Ideal for merchants or regular receivers, these QR codes provide a seamless transaction experience.
As Bitcoin continues to evolve, the ways in which we can send and receive payments also progress. From the foundational on-chain addresses to the near frictionless Paycodes, there are now payment methods that serve our needs across a range of scenarios.
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