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Speed An off-chain transaction can complete instantly, without waiting for confirmation. Naming With off-chain transactions, you can send Bitcoins to another user by referencing their username, rather than typing in an address. Possibly lower transaction fees, possibly fewer on-chain transactions Depending on how many transactions happen off-chain, it can ...


6

Coins don't really move "off-chain", in the described case you would send money to an address at Coinbase that is associated with your friend's account. As Coinbase manages their customers' accounts for them, he would see on his account page that his balance increased, but he wouldn't be in control of the private key associated with the address. Now to "...


6

There's no fundamental reason why you couldn't use a non-bidirectional link. The onion routing protocol of lightning is ignorant of the channel between two nodes. Hypothetically, if two lightning nodes were right next to one another, you could have robotic arms pass pennies back and forth in lieu of a lightning channel. That said, would a non-two-party ...


6

Is there a way to transfer/import bitcoin from one address to another in order to avoid transaction fees? No. It is not possible to move btc between addresses without publishing a transaction to the blockchain. However, there are some ways to accomplish a similar result (transferring/altering the ability to spend some coins), but I think every one of those ...


5

No, that's not accurate. Witness data is on-chain, inputs have a similar byte length as before (they are just weighed differently), and the transaction throughput is increased because segwit is a defacto blocksize increase. Thus, with segwit, the witness data was separated from the rest of the input. More specifically, the witness data is now "off-...


5

It doesn't. From the point of view of the blockchain there are just 2 transactions: one going into an exchange address the other is going out of an exchange address. For example: You sent 0.1 btc to an exchange [recorded on blockchain] Some other people send other amounts to that exchange (exchange controls all these addresses) [recorded on blockchain] ...


5

Whoever made that example doesn't seem to understand how the lightning network works. I think the creator of this scenario is confusing how the lightning network functions with how traditional deferred net settlement functions. With the LN, you don't hold accounts with the people you have open channels with. Instead, you have money tied up in the channel ...


4

They are not transferring coins. They are issuing IOUs that are only valid on their platform. The coins are not transferred until a user makes a withdrawal to their own wallet, which usually does involve a withdrawal fee. Similarly, your initial deposit to the exchange is much slower, and involves a transaction fee, which is paid by you.


4

You are correct. It is not possible to get Diana into the Channel Factory without a transaction that closes and reopens with Diana. Splicing-in and splicing-out as explained by Decker et al. in the paper you mention is not secure. Imagine the following situation: Alice, Bob and Carol spliced out Dave by creating a new Allocation within the same factory, ...


3

Payment channels are a specific form of state channels used for forwarding payments (as in the Lightning network). State channels are a more abstract idea: In theory you could use the ideas of cryptographically securing a state between two or more participants (the balance in payment channels) backed by a blockchain for something else than payments (like ...


3

There will have to be a public record of a transfer into address B before any transfers can come from address B. Internally the provider may move the funds from one address to the other "off-chain" for purposes of display but until some BTC moves into address B publicly it can't be spent from B. Most likely when you attempt to send BTC externally from ...


3

First of all, there are many types of off-chain transactions. Any movement of value in BTC that does not directly correspond to a blockchain transaction can be classified as one. This includes: giving someone a computer/phone that has a wallet witg BTC on it giving someone a private key/physical bitcoin. giving someone access to a shared webwallet account ...


3

Yes, you have a fully custodial account on Coinbase, thus Coinbase is holding your bitcoins for you. When a customer buys bitcoins or receives a payment from another customer of Coinbase, Coinbase only updates their balance sheet to track their debt to you. This has the advantages that they can forgo to create an on-chain transaction which costs them money (...


3

From the perspective of the Bitcoin network, Coinbase owns both the Bitcoins you transferred in, and the Bitcoins they sold to you. This is useful from a technical perspective, because Coinbase can have as many transactions within their system as they want, and no-one outside of Coinbase needs to keep track of them. This is problematic because Bitcoin can'...


3

Do I first need to transfer some BTC to a public bitcoin address owned by the wallet provider? Yes. Is it simply that (assuming I'm correct above) the wallet provider knows my balance off-chain and will make a transfer to my address on-chain? Yes. I've searched in vain, but not been able to find a detailed explanation of how off-chain transactions ...


3

An off chain transaction is a change in BTC ownership (a payment) that is not a Bitcoin transaction (not just an invalid or non-standard one; it's something unrelated entirely). If I hand you a private key, or a wallet file, or a physical coin, that is an off chain transaction. If you and I both have accounts on a USDBTC exchange, and you're buying BTC and ...


2

Are the transactions private or public? Mostly private. If you are not involved in a transaction (i.e. not a sender, receiver, or intermediary), you really won't know anything about the transaction. Transactions occur off chain so there is no permanent record of a transaction happening. All that outside observers will see are the channel opening and closing ...


2

This is absolutely possible. The negotiation between the payment-channel participants can happen over the ad-hoc network. However, each participant must still run a fully validating node at all times when he/she has an open channel-state, to be able to react to cheating counterparties. This validating full node may receive its updates over the ad-hoc ...


2

In lightning network payments are onion routed. The only thing a PSV could reveal is the previous and next hop, but they can not know the origin or the destination. They know it came from Alice, and went to Bob, but they do not know where Alice may have gotten it from, or where Bob may send it to.


2

No you don't need to open a channel with everyone whom you want to pay. The lightning network is a network of payment channels. This means that you can use the first channel to send money to other participants in the network as long as there are sufficiently liquid paths of channels from your node to the recipient.


2

Off-chain protocols like Lightning and sidechains can offer instant settlement but they come with their own set of trade-offs. Lightning requires you to be online 24/7 to monitor the chain and the private keys for your funds are hot rather than in cold storage. Sidechains, depending on the design, require limited trust in third parties to peg in and out. ...


1

First I would recommend to read BOLT2 in the section normal channel operation in order to understand exactly how and when htlcs are resolved. The whitepaper is heavily outdated and only explains the principles. That being said the problem of your question remains. To answer your question : intermediate nodes should resolve HTLCs as quickly as possible but ...


1

Yes, exchanges tend to have huge cold wallet where they amass and send most of their bitcoins ( you can even follow those addresses by each exchange on the top 100 richest bitcoin addresses ) When a user want to withdraw fund they can use smaller hot wallet to send coins, some exchanges will use payment channel for the transfer but most have not adopted it, ...


1

The information that ends up on the blockchain is the balance of all the payments between us. Imagine I commit to up to $200 going to you, and you do the same to me. That's the opening transaction on the blockchain. If I send you $100, and you send me $80, that's just between you and me. All the blockchain cares about is what happened to the final $20: in ...


1

You are confusing two things here: payment channels and network communication. A payment channel is really the set of commitment transactions and their revocations. It is unrelated to network communications and the participants in a payment channel do not need to communicate via one specific way. The network communications that nodes use to talk to each ...


1

Your deposited funds are in the custody of an exchange. Since your payment instruction only moves the exchange's obligation from you to the recipient, it is detrimental to make an on-chain payment. They'd be paying a fee to send to themselves. Instead, the exchange simply updates their database to reflect your transfer.


1

Individual transactions on the lightning network will never be confirmed on the blockchain. However, the net sum of value passed back and forth on a single channel (regardless of how many lightning transactions that is) will be validated on the blockchain as part of one closing transcribe for the channel. This is similar to how money is transferred in the ...


1

An off-chain transaction means in simple terms that the parties involved in the transaction basically exchange their private keys. Say you want to pay your friend 1 BTC. You would just give the private key to your address holding the 1BTC. Go through this link for more details. Now coming to your questions. Firstly, note that accounts and the move api have ...


1

Coinbase will do an offline transaction depending on whether the recipient address is part of coinbase wallet. If recipient address is part of a coinbase wallet then the tx can be easily done offline, otherwise the tx has to be on bitcoin blockchain. If you use wallets like electrum/mycelium they will always do onchain transactions.


1

You answered your own question. Rephrasing as a statement: [Some companies] detect that Block 1 no longer exists and then reverse the transaction to A and B's wallet. [Other companies] take the hit and lose the 10 BTC from their profits. Which solution to implement is a choice that's up to the company---neither solution is inherently better or worse. (...


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