How Lightning Payments Work

Lightning is Bitcoin's second layer — it enables instant, low-fee payments by routing transactions through a network of payment channels. Instead of waiting for on-chain confirmations (which take 10+ minutes), Lightning payments settle in milliseconds. When you pay on Colabonate, a Lightning invoice (a special encoded string) is generated for your order. Your wallet decodes it, sends the satoshis through the network, and the merchant receives them instantly. No middleman, no bank — pure peer-to-peer value transfer.

Hold Invoices and Escrow

For purchases above a certain threshold, Colabonate uses "hold invoices" to protect buyers. This special type of Lightning invoice does not settle immediately — the funds are held in escrow until the buyer confirms receipt and approves release. Once the buyer confirms, the funds are instantly transferred to the seller. If there are issues and a dispute is opened, the Arbitration Council can release or refund the funds. This dual-signature system ensures both parties must agree — money only moves when both are aligned.

Multi-Stage Escrow for Services

For services completed in multiple stages (like development, legal consulting, design, etc.), Colabonate uses milestone escrow. The total amount is split into parts — each milestone releases funds when completed. Example: A 100,000 sats design project might have 4 milestones — concept sketch (25k), first draft (25k), revisions (25k), final delivery (25k). After each milestone, the buyer reviews and approves release before the next stage begins. If issues arise in any stage, a dispute can be opened — released funds stay safe, unreleased funds can be refunded.

Dispute Resolution via Arbitration Council

If buyer and seller cannot agree, either party can open a dispute. The dispute is handled by the Arbitration Council — a decentralized group of experienced community members. They review arguments from both sides, evidence, and chat history, then make a fair decision. Possible outcomes: full refund to buyer, full release to seller, or proportional split. Once the decision is made, escrow funds are released or refunded accordingly. Arbitration Council fees come from a dispute fee, motivating them to make fair and timely decisions.

Lightning Wallet Requirements

To use Colabonate's Lightning payment feature, you need a Lightning-compatible wallet (e.g., Alby, BlueWallet, Zeus, Phoenix). Your wallet must be able to pay Lightning invoices — most modern wallets support this. Your wallet needs sufficient "inbound liquidity" to receive satoshis over Lightning. If your wallet is newly created, you may need to add liquidity via on-chain funding or LNURL withdraw. For larger amounts, use a wallet with sufficient capacity or connect multiple wallets.

Payment Limits and Identity Verification

Lightning payments have limits based on your identity level. L0 (anonymous) users have lower payment limits to protect new users. L1 (verified Nostr key) allows higher limits. L2 (peer verified) allows larger transactions. For very high-value purchases, L3 (Human Identity) may be required. Identity upgrades happen through the Identity tab — you can upgrade via Nostr peer verification or Human ID verification. Higher identity levels not only increase payment limits but also increase your trust score — sellers prefer working with verified buyers.