Topic: Bitcoin Lightning Network supposed to radically change bitcoin transactions (Read 129 times)

I'm partial to Metcalfe's law, which states:

I'd start here.

Thanks guys, I understand it fairly now. For Ethereum I meant projects like Tomocoin and GoNetwork. But now I am not sure if they are same like lightning network.

the very simple version is this. imagine you make regular payments to someone. like walmart for instance.

instead of you making a transaction of $1 for a loaf of bread each day.
1youraddress 0.00013btc -> 1Walmartaddress 0.00012 (fee:0.00001)
signed:you


you instead put a months worth of funds into a joint account (multisig address). walmart can also put funds in too, if they wanted
1youraddress 0.00365btc -> BCq1yourandwalmartchanneladdress 0.00364
signed:you(fee:0.00001)

1Walmartaddress 0.00002 -> BCq1yourandwalmartchanneladdress 0.00001
signed:walmart (fee:0.00001)

now away from the blockchain you and walmart can makes transactions where you both need to sign.. but then DONT need to send to a bitcoin pool to add to a block
BCq1yourandwalmartchanneladdress 0.00364 -> 1youraddress 0.00364
BCq1yourandwalmartchanneladdress 0.00001-> 1Walmartaddress 0.0000
signed:you
signed:walmart (fee:0.00001)

then when you want to pay walmart for bread you both make, sign but dont transmit a new tx by adjusting who owes what of the amount in the multisig:
BCq1yourandwalmartchanneladdress 0.00364 -> 1youraddress 0.00352
BCq1yourandwalmartchanneladdress 0.00001-> 1Walmartaddress 0.00012
signed:you
signed:walmart (fee:0.00001)

and tomorrow, again withut transmitting to a mining pool you agree to pay for another loaf of bread
BCq1yourandwalmartchanneladdress 0.00364 -> 1youraddress 0.00340
BCq1yourandwalmartchanneladdress 0.00001-> 1Walmartaddress 0.00024
signed:you
signed:walmart (fee:0.00001)

and so on and so on
now because you are not actually sending these transactions to the bitcoin pools to add to the blockchain your not actually spending the fee. nor are your transactions in blocks.. they are privately held between you and walmart, until such a point as you run out of funds you deposited in, to give to walmart or you both agre to close the channel and transmit the most recent tx to a bitcoin pool to be added. at which case you have done maybe 28 purchases of loaves of bread but only spent on fee of 0.00001 for all of the month.

...
now thats the basic unbiased and unbuggy concept.. hwever LN is not as unlimitd, as powerful, as refined, as utopian as made out by certain devs and the reddit hype tries to make out. there are issues and limitations.. it wont irradicat onchain spam. it wont make onchain fee's micropennies and its not useful for everyone.

but ill leave that for another post to explain the issues

I don't know what you mean when you say "the same thing is for Ethereum". Bitcoin and Ethereum are very different coins, and have very different goals, but I will say something about the LN first. As you should probably know by now, bitcoin, just using the blockchain has a scalability problem. The mempool is always working at max capacity, and that means there is a big "waiting list" of transactions to be verified and written into the blockchain.

Not going into details here, but imagine a book or ledger, where all bitcoin transaction are being written so that we know they are legit transactions. Imagine workers first verifying that the transaction is legit, and then writing all those transactions.

Since we only have a few number of workers, they just can't verify and write, everything fast enough, and transactions get delayed.
Now imagine that if you want a transaction to be verified and written first, you could pay some extra cash to those workers. Since that is possible, and not illegal, a lot of people keep paying more and more, to get their transactions worked first. This makes fees higher.

Now imagine that there are some transactions that are executed in a digital way before going to those workers. People trust those "channels" and keep making payments with each other there. Since it's all digital, it's fast and cheap (most of them actually free). Nothing is being recorded on that book right now, until those users make that request. So you have thousands of instant transactions being made, and only the "final one" being recorded on the book/ledger. This is the lightning network, and that's why it should solve the scalability and fees issues, related to bitcoin.

All of this is quite complicated, and I don't even have the knowledge to get into details, but I think this should give you a nice picture on how things will be done with the LN.

Researchers say that lightning network would drastically reduce the transaction fees, and prop up the value of bitcoin very much. But I am finding difficult to understand lightning network. And same thing is for Ethereum too.

Any idea.