Q 1: What is the Lightning Network?
A: The Lightning Network is currently under development. It will become a decentralized network that enables instant off-chain transfer of the ownership of bitcoin, without the need of a trusted third party.
The system utilizes bidirectional payment channels that consist of multi-signature addresses.
One on-chain transaction is needed to open a channel, and another on-chain transaction can close the channel.
Once a channel is open, value can be transferred instantly between counterparties, who are exchanging real bitcoin transactions, but without broadcasting them to the bitcoin network.
New transactions will replace previous transactions and the counterparties will store everything locally as long as the channel stays open.