Transacting with Bitcoin can be done on multiple layers. Not only is the Bitcoin blockchain the only way to send BTC back and forward. With the rise of the Lightning network and many other networks, we see the adoption of Bitcoin Lightning wallets accelerate. But what is a Bitcoin Lightning wallet, you might ask?
A Bitcoin Lightning wallet is a wallet that lets you send Sats (BTC) over the Lightning network. This network makes it much easier, cheaper, and faster to send a Bitcoin transaction. But to do this you will need to have a Lightning wallet and not just a Bitcoin wallet for the main blockchain.
Custodial Lightning wallets
Lightning wallets, like every other wallet, come in the form of custodial wallets and noncustodial wallets. Custodial Lightning wallets are wallets that hold the funds for you. Meaning that there is a company/software provider in the back that controls the BTC for you and provides you with easy-to-use wallet software.
These types of wallets make it easy to get started as you often don't need to set anything up or need almost no prior information about Bitcoin or the Lightning network. Because of this we see many people onboard newcomers with custodial wallets and helping them get started on their Bitcoin journey.
Although Custodial Bitcoin Lightning wallets are a good way to get started, they do not give you a lot of privacy or control of the wallet. Making a custodial wallet more like a lightning-fast Bitcoin bank account. For beginners, a custodial wallet might be a good way to play around and learn how to use Bitcoin. But in case you already know how to do that, you can better move onto a noncustodial wallet and take full charge of your finances.
Noncustodial Lightning wallets
Noncustodial Lightning wallets might be a bit more difficult to set up but do give you a lot more control of your funds and privacy of how you spend them. With a noncustodial Lightning wallet, you have full control of the funds on it. This means that if you lose access to your wallet and do not make a proper backup, you will also lose your funds. So if you decide to move to a noncustodial wallet, make sure that you have a good backup, because your funds will be in your full control.
Having a noncustodial wallet will be better in the long run. Not only because it protects your privacy more than custodial other wallets do. But also because no one can make dumb decisions with your funds. With a noncustodial wallet, there is no third party that can go bankrupt causing you to lose your money. No, with a noncustodial wallet only you will have access to your Sats and decide what happens to them.
Many people in the Bitcoin space will tell you that noncustodial is the way to go, and we agree. However, it might be a bit more difficult and scary to start with. If you do know anyone who is an experienced Bitcoin user, you could probably ask them to help you get started with this, or you could test it out yourself with a few Sats, so you get comfortable at first.
How to get your funds on a Lightning wallet
When you first get started, you might wonder how to get funds on the Lightning network. You might already have some BTC on a normal Bitcoin wallet, but not on Lightning yet. There are a few ways to get it on Lightning. The most logical and most difficult is to run your own Lightning node and lock in some BTC. This way you can put it onto the Lightning network in the most private and noncustodial way. However, this is more difficult, and you will have to set up your own node and open channels to use the Lightning network.
Another way is by withdrawing your funds via Lightning from an exchange like Kraken, Binance, or Bitfinex. This way they will send you your Bitcoin via Lightning and take care of all the technical stuff for you.
If you prefer to not do either of these methods, you could always try to buy some Sats via a Lightning wallet that lets you buy Bitcoin on Lightning directly with your credit or debit card. Not every Lightning wallet overs this feature, but lots of them do, and make it super easy to get your hands on your first Sats.
How to move Sats from Lightning to the main Bitcoin blockchain
Moving your funds from Lightning back to the main chain works the same as moving it to Lightning but in reverse. Some wallets like Wallet of Satoshi also give you the option to send your Sats via a chain of choice, and they will take care of the rest. This way you do not have to worry about any of the technical details. But you will have to use their custodial wallet.
The best thing to do is of course to use and spend your Sats on the Lightning network. Because this is what the network is meant for. To transact and spend your Sats. If saving Bitcoin is something you rather do, you can better use the main Bitcoin blockchain.
If you do want to get your Sats to the main blockchain you will either have to go through a custodial or you will have to close the Lightning channel yourself, in case you have your own channels open.
Other types of Bitcoin wallets
Besides Lightning wallets and of course Bitcoin wallets for the main chain, there are also wallets for other Bitcoin side chains or networks that can process BTC. These can be wallets for side chains like Stacks, DefiChain, or wallets that support token standards like BRC-20. But other networks like Ethereum and Solana can transact Bitcoin over their network in the form of wrapped BTC. Do note that these wrapped versions of Bitcoin are actually Bitcoins held by a company that then issues a token on these other blockchains with the promise that you can exchange them 1 to 1. If you use these tokens you are at their mercy as it is them that control the real BTC coins.
Some Bitcoin Lightning wallets
If you want to get started with your own Bitcoin Lightning wallet, here are some that we have used and reviewed.
Noncustodial Bitcoin Lightning wallets:
Custodial Bitcoin Lightning wallets:
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