Does the Lightning Network support Bitcoin scripts, and what do the identifiers of Lightning wallets look like?

Question

I'm currently exploring the deployment of Bitcoin scripts within the Lightning Network. Specifically, I'm interested in understanding the compatibility and functionality of Bitcoin scripts within the Lightning Network protocol.

Firstly, I'd like to know if the Lightning Network supports Bitcoin scripts. Are Lightning Network transactions able to utilize Bitcoin scripts for custom smart contract functionality, similar to on-chain Bitcoin transactions?

Secondly, I'm curious about the identifiers of Lightning wallets. When interacting with the Lightning Network, do Lightning wallet identifiers resemble traditional Bitcoin addresses? Or are there distinct formats or structures used for Lightning wallet identifiers, considering the off-chain nature of Lightning transactions?

I appreciate any insights or resources that can shed light on these questions.

Answer 1

The lightning network is composed of nodes that span channels between each other. A channel is implemented per a 2-of-2 multisig output that is collaboratively controlled by the two nodes participating in the channel. The channel participants use a multistep update protocol to renegotiate the final payout from the channel by creating a new state and then relinquishing the old state. Each state of the channel is encoded as one or multiple unconfirmed Bitcoin transactions that the channel participants store locally. This permits either to unilaterally close out the channel in case the other party ceases to interact.

The Lightning Network protocol uses transaction templates that strictly adhere to the Basis of Lightning Technology (BOLT) standard. Therefore, it is not possible to overlay lightning payments with additional script conditions, but given the quick-paced payment resolution, a lot of use-cases can be facilitated by streaming payments, multiple installments, paying just-in-time, etc.

Lightning node identifiers are distinct from Bitcoin invoice addresses.