Key Takeaways
- A Payment Request: An invoice is a structured demand for a specific amount of bitcoin.
- QR Code Integration: Invoices often include a QR code for quick, error-free mobile wallet payments.
- Time-Sensitive Nature: Many invoices, particularly on the Lightning Network, expire after a set period.
What is an Invoice?
In the Bitcoin world, an invoice is a formal request for payment. It specifies the exact amount of bitcoin (BTC) or satoshis (sats)—the smallest unit, where 100 million sats equal one BTC. For instance, a freelancer might issue an invoice for 0.0025 BTC for a completed project, clearly stating the recipient's address and a description of the service.
These digital bills often feature a QR code, allowing for a quick scan-and-pay experience with a mobile wallet. On the Lightning Network, invoices are particularly dynamic; a coffee shop might generate one for 10,000 sats that expires in 60 seconds. This time-sensitive nature locks in the exchange rate and ensures the transaction is settled promptly.
How is an invoice different from a Bitcoin address?
A Bitcoin address is just a destination. An invoice bundles that address with critical data like the exact payment amount and an expiration time. This structure prevents common payment errors and provides a clear transaction record for both the sender and the receiver.
The History of the Invoice
Early Bitcoin transactions were manual and prone to error. Users had to copy-paste long, complex addresses and manually enter the payment amount. A simple mistake could lead to a permanent loss of funds. This created a clear need for a more structured and reliable way to request payments.
The introduction of Bitcoin Improvement Proposal 21 (BIP 21) was a major step forward. It defined a standard format for payment requests, allowing wallets to generate QR codes that contained the address, amount, and a label. This simplified the process, making commerce more practical and user-friendly.
With the rise of the Lightning Network, invoices evolved further. BOLT 11 invoices added features like expiry times and cryptographic proofs. These were essential for the network's high-speed, automated payments, providing the security and structure needed for merchants to accept instant bitcoin transactions without manual oversight.
How the Invoice Is Used
The practical applications for Bitcoin invoices span from everyday commerce to complex financial arrangements.
- E-commerce Payments: An online store generates a BOLT 11 invoice for 150,000 sats for a purchase. This invoice locks the price for 10 minutes and includes order details, ensuring the customer pays the correct amount and the merchant can automatically confirm the sale.
- Freelancer Invoicing: A developer invoices a client for 0.05 BTC for completing a software module. The invoice, created using a BIP 21 URI, contains the payment address, amount, and a memo like "Q2-2024 Project Milestone," creating a clear financial record.
- Point-of-Sale Transactions: A cafe's payment terminal creates a Lightning Network invoice for 25,000 sats for a coffee and pastry. The QR code is displayed for a few seconds, allowing for instant payment confirmation and keeping the customer queue moving quickly.
Are There Alternatives to Invoices?
While invoices are the standard for requesting specific amounts, the Bitcoin ecosystem offers other methods for receiving payments. These alternatives provide flexibility for different situations, from public donations to recurring subscriptions, each with its own set of trade-offs in structure and user experience.
- Static Addresses: A simple, reusable Bitcoin address displayed for donations or general payments. This method lacks the specific amount or tracking data of an invoice, offering simplicity over structure.
- Payment Codes (BIP 47): These allow for a single, shareable code that generates unique addresses for each transaction, improving privacy. It's a more advanced way to receive payments without broadcasting a static address.
- LNURL-Pay: A Lightning Network protocol that lets a user scan a static QR code to pull payment details from a server. This supports dynamic, server-side payment requests, useful for things like donation pages or paywalls.
The Future of the Invoice
Future invoices on the Lightning Network will likely become more programmable. Imagine invoices that automatically split payments between multiple parties or trigger other on-chain actions upon settlement. This evolution moves them from simple payment requests to active components within complex, automated financial workflows.
The development of standards like BOLT 12 points to this future. It introduces static, reusable offers that generate unique invoices on demand. This improves privacy and user experience for recurring payments or donations, moving beyond the single-use model of earlier Lightning Network invoices.
Join The Money Grid
You can access the full potential of digital money through Lightspark's Money Grid, an open payments network built on Bitcoin. The platform provides the infrastructure for instant, global Bitcoin payments over the Lightning Network, offering enterprise-grade tools and protocols to move money as freely as information.
