75
votes
Accepted
How does the Lightning network work in simple terms?
The Lightning Network is a collection of payment channels between pairs of nodes. To create a payment channel, two users commit funds to a UTXO under shared control. The shared funds allow the users ...
- 73k
64
votes
Accepted
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 ...
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17
votes
Accepted
What is "segregated witness" and how can it improve network scalability?
It's not a silver bullet solution, but it's a really good start.
As Gavin Andresen has said, Segregated Witness is a poor name. The 'segregated' part of the name is there to denote that there is ...
- 14k
14
votes
Accepted
Why do bitcoin exchanges use "central" wallets?
Note: This answer applies to Bitcoin, not "crypto" generically.
On terminology
I think you may be conflating "wallets" and "addresses". Addresses are used to communicate ...
- 73k
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 ...
- 73k
12
votes
Accepted
What is the User Activated Softfork (UASF) proposal? How do its risks compare to hardforks?
What does the UASF proposal entail?
The UASF proposal is an extension of BIP9 that allows soft-forks to specify a mandatory activation time. If miners have not started signaling support by this ...
- 14k
11
votes
Accepted
How many more transactions per second will be possible with SegWit?
Best estimates on effective blocksize with SegWit are 1.6-2.0 MB.
Current transactions/second possible are around 3 tx/s. Given that the effective increase is 1.6 - 2.0x, the transactions/second are ...
- 7,749
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, ...
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11
votes
Scalability problem: is the end of Bitcoin near?
TL;DR:
No, the end is not near—we're just getting started. 20× is boring, let's figure out how to do 100,000×.
Let's first talk about what we are trying to achieve. We are not actually trying to ...
- 73k
10
votes
Accepted
Would sidechains help Bitcoin scale?
No. They can increase scale, but that is not what they are good at or intended for.
Before giving a longer answer, let me first talk briefly about the difference between scale and scalability.
...
- 102k
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, ...
- 7,749
8
votes
Accepted
What is the difference between on-chain scaling and off-chain scaling?
Note, I use scaling, capacity, and scalability as follows:
Scaling: Growing the network's utility in any fashion.
Capacity: The number of payments that can be processed on the network.
Scalability: ...
- 73k
7
votes
Accepted
What are the segregated witness tradeoffs?
If I understand correctly, there is a second Merkle tree of witnesses mirroring the transaction data. The witness tree's root is committed to in the coinbase, but otherwise this second tree lives ...
- 14k
7
votes
Accepted
Bitcoin distribution
A lot of people who accumulated thousands of coins in the early days spent them on silly things or cashed out during the 2012 bubble. Lazlo for example, spent 10,000 bitcoins on two pizzas. Nobody ...
- 5,596
7
votes
Accepted
What is the maximum number of transactions per seconds on Bitcoin Cash?
The throughput in Bitcoin is not defined in transactions per second, rather indirectly, via block size limit. What matters in the size of transactions in bytes. The more complex the transaction is (...
- 1,430
6
votes
Arguments against Bitcoin using adaptive blocksizes
The strongest arguments against dynamic blocksizes which can be determined by miner actions, is that they do not necessarily represent the interests of other participants such as users, node operators,...
- 311
6
votes
Accepted
If there a formula to decide when more decimal places will be added to Bitcoin?
To the best of my knowledge this has not yet been codified and it is hard to imagine there being a need to smaller Bitcoin increments anytime soon.
At this point smaller increments would suffer ...
- 238
6
votes
Accepted
Without side chains will transaction fees rise as block rewards fall?
You are correct that transaction fees per block are much smaller than block reward, but they are still significant and rising:
https://www.smartbit.com.au/charts/transaction-fees-per-block
Recently ...
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6
votes
How does the Lightning network work in simple terms?
Lightning Network is a layer on the top of the Bitcoin Blockchain. Le'me go in more detail.
It is a technology that makes bitcoin work faster, scalable and improve bitcoin in such a way that Bitcoin ...
- 171
6
votes
Accepted
What is Wrapped Bitcoin WBTC?
Disclaimer: I worked at BitGo when WBTC was kicked off, but I didn't work on the WBTC project.
Wrapped Bitcoin (WBTC) is an ERC20 token fully backed by bitcoins held in BitGo's custody. BitGo mints ...
- 73k
5
votes
Would sidechains help Bitcoin scale?
Sidechains don't increase scale without changing the security. However they could allow people making lower security (e.g. lower value) transactions to opt-in to use a higher scale, lower security ...
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5
votes
How scalable is a Blockchain-based system?
Blockchains are not really scalable. For the most security, blockchains need to be replicated on as many devices as possible. Those devices are full nodes and must download and verify every single ...
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5
votes
Accepted
On-chain scaling still required with Lightning Network?
Yes, it would require on-chain capacity increases if there were a lot of channels being opened and closed as well as normal on-chain transactions. This need is directly referenced in the Lightning ...
- 68.6k
5
votes
How does LN solve the liquidity problem?
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 ...
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5
votes
Accepted
Is it possible to splice a new participant into a LN channel factory?
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 ...
- 567
5
votes
Accepted
How is OP_CHECKTEMPLATEVERIFY a scaling solution
A bit of a meandering answer to the question, and to answer a side question: fundamentally what is a scaling solution?
OP_CTV does not increase the block space. Transactions using generally will use ...
- 299
4
votes
Which kinds of transactions show quadratic signature-hashing scaling?
Quadratic means that something grows as a square function of something else. If you're just talking about a one-input transaction, there is nothing that changes.
The quadratic hashing issue is that ...
- 102k
4
votes
Accepted
How isn't blockchain fundamentally broken?
The chain works by verifying every previous block, right? How does this not become an exponential problem?
I think you are assuming Blockchain growth is exponential with time, but it is linear with ...
- 1,296
3
votes
Will Bitcoin scaling affect the amount of hashing power required to keep the network secure?
This is a comment from page 199 of Mastering Bitcoin. I think its meaning is to be interpreted taking into account the two preceding sentences:
Note that the target difficulty is independent of ...
- 193
3
votes
Why not multiply "six confirmations" and divide Time-Between-Blocks and Reward by the same factor?
In consideration of replacing the 1 block with N blocks in the same time frame, N > 1, I see the following points:
Advantages
Expected time until first confirmation is reduced
Mining revenue is ...
- 73k
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