72
votes
Accepted
How does the Lightning network work in simple terms?
Say, you and I want to open a payment channel.
1) Putting funds into Lightning
We both send 0.05 BTC into a shared 2-of-2 multisig address. This requires a transaction on the Bitcoin blockchain.
As a ...
- 69.7k
63
votes
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What are Channel Factories and how do they work?
What are Channel Factories?
In short, Channel Factories are payment channels that can be used to create more payment channels. That sounds weird, but it's really pretty simple:
In a regular payment ...
- 11.6k
22
votes
How are paths found in Lightning Network?
Note: This answer was written in Spring 2016 and has since been overtaken by an actual spec and multiple implementations. I'm hoping to update this answer shortly.
Summarizing mostly from r/bitcoin: ...
- 69.7k
18
votes
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What security weaknesses result from using off chain solutions?
TL;DR:
The security assumptions of using a LN channel for payments:
The blockchain is functioning well (confirming transactions quickly)
Channel nodes can keep secret data safe
There aren't any ...
- 13.9k
17
votes
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Is centralization in the Lightning network inevitable? Why (not)?
“Centralization” is now a word constantly repeated but is one that, generally speaking,
no one tries to define accurately. ---Alexis de Tocqueville, Democracy in America, Vol.1, Part 1, ch.5.
...
- 11.6k
15
votes
Accepted
What is a hash pre-image as it is used for the breach remedy?
In the image below from Rusty Russell's Deployable Lightning paper, you can see a visualization of the commitment transactions and their outputs:
For each payment in a channel, there are two ...
- 11.6k
15
votes
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How is a node in the middle prohibited from keeping the money in a routed Payment in Lightning network?
Lightning forwards payments using a construction called a "hashed timelock contract" (HTLC), which allows the payee to redeem the transaction if they know the preimage to a given hash, or allows the ...
- 306
15
votes
How does Lightning transaction revocation work?
When you open a lightning channel, you will receive from the other person their revocation_basepoint, and for each commitment transaction, you will send to the other person a per_commitment_point. The ...
- 66.4k
15
votes
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"HTLCs don't work for micropayments"?
It takes about 200 vbytes to spend from a Lightning Network (LN) Hashed
Time-Locked Contract (HTLC) output used for routing a payment. At the default
minimum feerate of 10 nBTC/vbyte, that makes it ...
- 11.6k
15
votes
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Do we still need SIGHASH_NOINPUT for Lightning Network?
The lightning network as is is working without SIGHASH_NOINPUT. Thus in its current form it is not needed.
However Christian Decker came up with the eltoo payment channel construction. In a nutshell ...
- 11.5k
13
votes
Accepted
What is the Lightning Network proposal? What problem is it trying to solve?
Two issues with Bitcoin's design
Scalability of "everyone checks everything"
Bitcoin is a gossip network:
P2P nodes connect mostly randomly to each other and pass-on new information to each ...
- 69.7k
13
votes
Accepted
Is Lightning Network a risk for Bitcoin security since it reduces miner fees?
The idea that Lightning will reduce the amount of fees going to miners is very common, and we probably won't know for sure until we actually try it. However, I'll try to provide some arguments as to ...
- 9,139
12
votes
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What are the trade-offs between transacting on Lightning Network and Bitcoin mainchain?
Below describes these points during what's planned to be normal operation. Once a channel needs to be torn down because of a problem with one of the nodes (evil or accidental) some of these answers ...
- 6,286
12
votes
Accepted
What is a millisatoshi? I thought satoshi is the smallest unit?
It's not a mistake, it's literally a thousandth of a satoshi. A satoshi is the smallest unit for bitcoin, but lightning can transact with even smaller units while channels are open. The amount is ...
- 11.7k
12
votes
Accepted
Closing a channel in Lightning Network
The first three scenarios are indeed possible, the last one is identical to the second.
This is called a collaborative close. It has the advantage of using a lower on-chain fee since the transactions ...
- 9,139
12
votes
Accepted
Are lightweight LN wallets vulnerable to transaction withholding?
There is no substitute in terms of security and trust for running a full node.
There are different "lightweight client" concepts. Some of them are...
BIP37 (bloom filter):
[minus] With current used ...
- 5,982
11
votes
How does the Lightning network work in simple terms?
Lightning allows you to lock coins between two wallets, and then send special transactions between each wallet which only become "real" when they are added to the blockchain. But you don't do that, ...
- 213
11
votes
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When closing the channel for LN - how to calculate the fee for the blockchain transaction?
If worried about the original closing transaction having too high of fees:
The signed closing transaction that you're worried about (with too high of fees) has not yet been broadcast to the network, ...
- 347
11
votes
Accepted
What criteria should be taken into account when selecting nodes to create new lightning channels with?
I agree with Alex Bosworth and I have pointed this out about one year ago when I have filed an issue about the strategy used by the LND autopilot which basically looks for nodes with a high channel ...
- 11.5k
10
votes
Accepted
Lightning network and lightweight clients
How will the lightning network handle lightweight clients?
Most steps during the payment process in an LN channel don't actually require full knowledge of the blockchain or even the unconfirmed (...
- 13.9k
10
votes
Accepted
Does a segwit based side chain like the lightning network allow for fractional reserve?
A sidechain has its own blockchain which is coupled to the Bitcoin blockchain via a two-way peg. This allows tokens on the Bitcoin blockchain to be frozen in order to make new tokens available on the ...
- 69.7k
10
votes
Accepted
Why is the length of the transport messages on the lightning network encrypted?
TCP and other stream based protocols do not have a 1-to-1 correlation of application level messages and IP packets. If you call send() 3 times, it might result in sending a single IP packet over the ...
- 3,304
9
votes
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Routing in Bitcoin Lightning Network
There's no document explaining step-by-step, because the routing decisions are not part of the protocol (the BOLTs). It is purely client-side decision making about how to find a route through the ...
- 3,304
9
votes
Some questions about Lightning and Tor
Generally if you read BOLT 07 you will see that lightning nodes and channels can either be private or public.
This is independent of the fact if they run on tor or not.
The node announcment message ...
- 11.5k
9
votes
What are the downsides of Hodl Invoices?
I didn't attend the conference but here is my take on Hodl invoices. In a normal Lightning payment, the sender pays an invoice which contains the payment hash and the payee releases the pre-image to ...
- 7,203
8
votes
Accepted
Lightning Network scaling alternatives?
The obvious one would be side chains, the idea being that the transactions on the side chain would be off the main chain. Most other scaling solutions are either on-chain or centralized. For example, ...
- 7,709
8
votes
Accepted
Is the Lightning network a proof-of-stake system?
Calling the Lightning Network (LN) a Proof-of-Stake (PoS) system is orthogonal to the concept usually labeled as PoS.
What we usually describe as PoS is a mechanism to achieve distributed consensus ...
- 69.7k
8
votes
Accepted
Do parties in a Lightning Network channel need to be online?
The lightning network is comprised of bi-directional payment channels between two nodes. This means that either one of those nodes should be able to initialize a transaction at any time. These ...
- 8,782
8
votes
Accepted
What is Bitcoin's "genesis hash"?
They're exactly the same number; one is written in little endian notation and the other is big endian. Notice that the bytes (two-hex-digit pairs) are exactly reversed from one to the other.
Block ...
- 23k
8
votes
Accepted
What makes millisatoshi real?
Millisatoshis are the unit in which channel balances are accounted for. They are a necessary accounting unit, if the aim is to enable very small lightning payments amounts, which represents a protocol ...
- 2,491
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