Lightning Network?

Bitcoin
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Heard plenty about Lightning network and “zapping sats” and all this new hip lingo the kids are using these days. I’m familiar with Bitcoin and it’s many privacy/anonymity shortcomings. But what is the Lightning Network? How does it “improve” Bitcoin? Is it a side chain, or part of the main chain, or something else? Is there different cryptography involved or the same old secp256k1 elliptic curve that Bitcoin uses? How does it work and why do so many people here care about it?

Please explain, or share any resources you found helpful. Thanks!

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BTC Sessions is probably one of my favorite youtube channels for all things Bitcoin.

This video is a great starting place for understanding Lightning vs on chain BTC payments.

The 5 “why” of the Lightning Network VS on-chain transactions

  1. Because of the cost: Lightning transactions are much cheaper than on-chain transactions since they do not require the same level of computational resources and network fees. This makes them ideal for micropayments and transactions with small amounts.

  2. Because of the speed: Lightning transactions are almost instant, with confirmation times of a few seconds or less, compared to the 10 minutes or more required for a Bitcoin on-chain transaction.

  3. Because of the scalability: By moving transactions off-chain, the Lightning Network can handle a much larger volume of transactions than the Bitcoin network can handle on-chain. This allows for greater network throughput and reduces congestion on the Bitcoin network.

  4. Because of privacy: Lightning transactions are private, meaning that they are not broadcast to the Bitcoin network and do not appear on the blockchain. This makes them more difficult to track and trace, enhancing the privacy of users.

  5. Because of the flexibility: Lightning channels can be opened and closed at any time, allowing users to manage their funds more easily and giving them greater control over their transactions. This also enables innovative use cases such as Lightning-powered micropayments and recurring payments.

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Thanks for the resources! That is helpful and I can see how that would be cheaper/faster than most blockchains. Curious how Lightning creates “privacy,” especially in light of the recent Samourai Wallet seizure?

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So it adds privacy in the sense that if you think of a transaction happening in a hose. So you create a lightning wallet, and when you send funds to someone, they’re not directly receiving your funds, they’re getting funds from the liquidity that already exists in the channel, so yours goes in, and someone else’s goes out.

So think of me having a channel open with 500,000 sats in it, and you pay someone else and it utilizes funds from my channel, yours would go into it, but what the other person receives is funds that already existed in the channel. Our on chain transaction will settle later with each other as well as the channel with the receiver.

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I like to think of it as an abacus where you can move satoshis back and forth.

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Ok, now why didn’t I just think of that? That makes so much more sense…

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Per your explanation of paying in/out of the pool, I see how that isolates payee and payer from each other.

However, wouldn’t that make the “channel” ultimately in control?

  • Control of privacy, because the channel knows both sender and receiver.

  • Control of transaction, because the channel could subsequently block the transaction (i.e. DoS) via whatever attribution knowledge it has or it could allow the sender but never route to the receiver (i.e. poison), thereby essentially getting free sats.

Obviously, I’m exposing my ignorance here, and I could see some of these possible vulnerabilities being mitigated with Tor. But it seems like the channel needs to be ultimately trusted by both sender and receiver. I’m sure, by self-hosting, one of the two parties would trust their own server. The other party, however, has to have some faith.

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To a degree there is some trust but you ultimately control your channel and can close at anytime. L2 (Layer 2) is not a solution that comes without it’s own challeneges but does allow for fast, cheap BTC transactions that just aren’t possible doing on chain. I would equate it to, it’s your “spending money” per se. So for instance you have your main wallet, and you drop someone into your lightning wallet for just casual or planned expenses but you wouldn’t use it for a long term storage.

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