Electrum 4.0 release: Lightning Network, Watchtowers, PSBT & Submarine Swaps

Last week, the long-awaited version 4.0 of the popular Electrum bitcoin wallet was finally released, which has a number of exciting new features. For example, the latest version offers support for the Lightning Network, Watchtowers, Partially Signed Bitcoin Transactions (PSBT) and Submarine Swaps, among other things.

The integration of the Lightning Network into the open source Electrum bitcoin wallet is exciting, because the wallet has been popular among bitcoiners for many years. The integration of the Lightning Network in the latest version of the software can therefore make an important contribution to the further adoption and growth of the Lightning Network.

Lightning Network

With the Lightning Network, bitcoin transactions can be done quickly and cheaply. The network exists as a second layer network ‘on top’ of the Bitcoin network and aims to increase transaction capacity and speed and enable new functionality.

Via the Lightning Network, users can make mutual transactions via Payment Channels, whereby only the final or intermediate balance is occasionally registered on the Bitcoin blockchain. This can be done between two people, but you can also set up an entire network of users: the Lightning Network. A single bitcoin transaction can thus represent a multitude of Lightning Network transactions.

That is interesting because the normal transaction costs of Bitcoin in the form of a miner’s fee can be spread and the transaction speed is no longer limited by the block time of 10 minutes that applies to the Bitcoin blockchain. Transactions over the Lightning Network are almost instant and cost only a fraction of a cent. This opens the doors for a multitude of applications such as micro payments. The Lightning Network also offers privacy benefits and more options, which, for example, enable atomic swaps or token issuance for digital assets .

Submarine swaps

The Lightning Network is actually a complex web of individual payment channels between users. Within these payment channels, funds are moved back and forth like a kind of jigsaw puzzle, but it sometimes happens that liquidity ends up on one side. In that case, channels must be closed and/or new channels must be opened, which incurs ‘ on-chain ‘ transaction costs on the Bitcoin blockchain.

With Submarine Swaps this is not necessary and as a user you can easily top up your Lightning Network wallet for a small payment. Normally you have to open and close channels yourself, but via a Submarine Swap you simply send bitcoins to a bitcoin address of a Swap provider (in this case Electrum itself) who in return sends back the same amount of bitcoins via the Lightning Network. When that is done, the previously sent bitcoins are released to the Swap provider and if not, the code will automatically return the bitcoins.


Another problem facing the Lightning Network is that users actually have to stay online to check the open channels, otherwise a malicious counterpart is able to close the channel based on an outdated ‘standpoint’. In principle, the Lightning Network penalty mechanism then comes into effect, but your lightning node must then be online to detect the fraud.

Watchtowers are a way to outsource that control to a third party, so you don’t have to keep your lightning node online all the time.

Partially Signed Bitcoin Transactions (PBST)

Partially Signed Bitcoin Transactions (PBST) are, as the name implies, bitcoin transactions that are partially signed. This is useful, for example, for transactions where several parties have to sign. The well-known MultiSig or MuSig is now often used for this, but they have the disadvantage that the transaction must be built up in one go before it can be sent to the network. So everyone has to sign first before the transaction is offered to the network.

With a PSBT this is not necessary and it is possible to send a partially signed bitcoin transaction to the network. Other parties involved can then view and verify the PSBT at a later time and, if they agree, also sign it with their private keys .


Electrum was originally released in 2011 by Thomas Voegtlin (but later aided by others) and was one of the first light wallets to make bitcoin accessible to a wider audience. With a light wallet, or SPV wallet, you do not have to run your own node or download the entire blockchain, which made bitcoin a lot more user-friendly for many people. Today, most bitcoin wallets are light wallets.

However, remember that if you use a light wallet, there is a little more trust involved than if you run your own bitcoin node such as with the Bitcoin Core wallet. With light wallets you connect (unless you set it otherwise) to a bitcoin node of someone else. Cryptography still protects your bitcoins against theft, but you have to trust that the bitcoin node you connect to will provide you with the correct information about the blockchain. This can be important during a hard fork or an attack on the network. The privacy of light wallets is also a bit more vulnerable, because the bitcoin node you connect to may be able to see which transactions originate from you.

For many people these are acceptable risks in most cases, but running your own bitcoin node is essential for the highest level of security.

You can download the latest version of Electrum from the website.

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