BITCOIN LIGHTENING NETWORK
A network called the Lightning Network runs on top of a blockchain to enable quick peer-to-peer transactions. Other cryptocurrencies, like Litecoin, have included it; it is not exclusive to Bitcoin.
You may be wondering what we mean when we say that something "sits on top of a blockchain." What is referred to as an off-chain or layer two solution is the Lightning Network. It enables people to conduct transactions without having to log each one on the blockchain.
Despite being independent from the main Bitcoin network and having its own nodes and software, the Lightning Network nevertheless interacts with it. You require special blockchain transactions to join or leave the Lightning Network.
With your initial transaction, you're essentially creating a kind of smart contract with another user. Just picture the smart contract retaining a private ledger with the other user for the time being. We'll get into the specifics shortly. Numerous transactions may be recorded in this ledger. Only you and your counterparty can see them, but due to some odd setup elements, none of you can cheat.
A channel is the name of this little ledger. Let's say Alice and Bob each contributed 5 BTC to the smart contract. They each would now have a balance of 5 BTC in their channel. Then Alice may write to the ledger and give Bob 1 BTC. Currently, Alice has 4 BTC and Bob has 6. The balances would then be 6 BTC on Alice's side and 4 BTC on Bob's if Bob later sent 2 BTC back to Alice. They can carry on in this manner for some time.
Either party may at any point broadcast the channel's current state to the blockchain. The balances on each side of the channel are then distributed to the appropriate parties on-chain.
Transactions using Lightning are extremely quick, as the name implies. Payments can be made as quickly as your internet connection will allow them to be done without having to wait for block confirmations.