The Lightning network has become an integral part of any bitcoiners growing arsenal. As its popularity grows and more bitcoin is locked in payment channels, it could be critical to the future of bitcoin. If you’ve ever played around with a Lightning-enabled wallet or used a Lightning-enabled App (Lapp), you’ve probably noticed it’s still pretty rough around the edges and used mainly by bitcoin enthusiasts and hobbyists.
You would be forced to generate a new lightning invoice every time you want to receive funds, and you know how lazy we’ve become, but also not ideal for those looking to have a static donation or payment QR codes or payment addresses.
Thankfully, developers in the lightning space have been working on a solution.
To tackle the issue of a standard payment format that can be reused, the standard known as Lnurl has been developed. The new protocal is steadily gaining traction with Lightning wallets, adding the feature including Zap, Phoenix, Breez, Blue Wallet and Wallet of Satoshi, and dozens of other apps.
What is LNURL?
LNURL provides a standard for receiving sats over Lightning without having the user paste an invoice. Typically when a user wants to receive payment in LN-sats, they have to generate an invoice. It could be an unspecified invoice or a specified value invoice; once sent, that invoice is paid. LNURL takes away that complexity by allowing you a static QR code that is re-usable or a static URL link you can use to pay another lightning user.
I think it’s pretty obvious the main reason for LN-URL is to streamline payments and allow it to be done without having to request an invoice every time you want to tip someone. It was a total ball ache for social media; you would have to constantly generate a new QR code or this insanely long text string to get your 200 sats tip for a meme.
Having a static QR code makes it easier to shill your link to get paid and makes sending a 5 sats easier for seeing someone post something online that made you snort a little, just to show you appreciate it.
Removing the need for custodial services
Prior to the introduction of LN-URL, there were several custodial tipping services that would allow you to create a static QR code or email address that you could re-use to make it easier for people to pay you without having to interact with each one.
But this is not the ethos of bitcoin; while these services are great for some people, we want to have the option of remaining non-custodial as much as possible, and LN-URL brings that to Lightning.
Getting inbound liquidity
If you’ve ever used Lightning in a non-custodial wallet with or without a Lightning node, you’ll know the pain of establishing your first lightning channel.
Say you and a friend want to use Lightning to pay one another; they are a bit of a noob, so you’re going to uncle Jim the situation. You deposit 1 million satoshis on your side, and you’re ready to rock; you’ll quickly find that you can’t pay your mate.
If your friend, the counterparty in your transaction, has an LN wallet that is non-custodial but has no money on their side, then you don’t have “inbound capacity.”
This means you can send payments but can’t accept them. To fix this, you would need to open a channel with someone who has bitcoins on their side.
This is an obvious roadblock for easy payments over the network. Many new users open a channel, then run into the problem that they can’t accept payments and aren’t sure what to do; I know I did when I first set it up with a Zap wallet.
I had to use Bitrefill to purchase in-bound liquidity, and while it was fairly straightforward, I had to go hunting for what the issue was, and no rational person was going to bother with all that drama. If you are stuck in this mess, you can use services, such as Lightning Loop and Bitrefill’s Thor, which offer products to retrieve inbound capacity.
The advantages include making it much easier to request “inbound liquidity,” meaning the user needs to make sure enough bitcoin is in the right spot in the network to receive payments, which is one of the more common and troubling UX problems for users. It also helps those who have to do channel rebalancing from time to time.
Another nifty feature with LN-URL is since it’s a static and re-usable method, it can be used to validate yourself to certain websites or apps. LNURL-Auth can authorize, register or log in to external services and websites, so if you prefer to be a nym and keep your data footprint low, setting up an LN-URL not tied to your public profiles would be great for logging into sites that offer LN-URL Authentication.
The advantage for the user is that no personal information has to be disclosed. Though part of the LNURL specification, LN-Url-auth doesn’t touch the Lightning Network. It uses your bitcoin wallet’s existing seed to generate a unique signing key for each website you authenticate. The protocol can be used as a 2FA option or a replacement for email/username + password login.
Moving funds and managing LN incoming
Another piece of the specification, LN-URL-withdraw, makes it easier to move funds around. As the Lightning network expands, you’re going to find yourself engaging with a bunch of websites and applications that you may receive funds from for your engagement; let’s stay its bitcoin games, or your tip jar on Twitter or doing microtasks on a freelance website.
Instead of having these sites hold your sats until you provide an invoice, you can now use LN-Auth or connect an LN-URL to the email address you use for the service. So when sats get paid, they go directly into your wallet without you having to request the payment.
This should help you create a steady stream of sats flowing into your wallet with all you do online.
Turning Lightning into a tradfi fintech experience
If you’ve used a fintech app that allows you to connect your bank account or credit card to it for easier payments, then you’re probably familiar with the experience of paying via a tap, payment link or QR code. LNURL brings that user experience to Lightning, a user experience people have become familiar with, and while it is similar in nature on the front end.
The benefit with Lightning is you’re paying far fewer fees, you’re taking no counterparty risk, and you’re instantly settling that transaction. It may seem like a simple addition to Lightning but it can have widespread effects making commerce, tipping and even channel rebalancing easier.
I look forward to seeing LN-URLs pasted all over the internet and added to social media profiles for tipping and much more.