Topic: Lightning Network Could Scale Bitcoin (Read 541 times)

think of it like depositing funds into an exchange.
to send funds to the exchange. you do a normal bitcoin transaction with normal bitcoin fee.

now forget about the blockchain..
you can day trade on the exchange to your hearts content using bots to do trades real fast, all your trades on the exchange are not listed on the blockchain. and your not paying bitcoin miners a fee for every trade done on the exchange..

and when you withdraw(settle) from the exchange your only paying bitcoin miners the standard transaction to release funds out of the exchange

.. any fee's inside the exchange is not related to bitcoin fee's or mining costs as they have nothing to do with it.
any fee's inside the exchange are just amounts the exchange itself wants to profit on.
some exchanges have no trade fee's some do.
again this has nothing to do with the bitcoin network or miners.

for instance
say Visa / Mastercard set up a LN hub, expect 1-2% fee per use
say starbucks set up a LN hub, expect 0% fee per use and a possibility the customer getting 0.1% back as a loyalty scheme to continue being their customer.
say the programmers of lightning set up a hub. they may want to charge something to work as the middleman to get some income to cover their costs of all their hard work programming the network

at this point i cant see anyway of guessing what fees a hub will go with, but i can presume they would vary depending on who the hub is and what services / products they offer customers. the only thing that is sure. is the cost to deposit(setup/fund channel) and withdraw(settle/close channel)

I'm wondering if those "supernodes" will be rewarded by any way or not. Since I think they'll need a good amount of computation power, that would seem fair.

I am also still struggling to get my head around this. Is the LN not supposed to be a lot cheaper than normal tx on the Blockchain? In

comparison, would bigger blocks not have been a quicker solution to solve the scaling problems? I know it increase the risk, but it would

have been a lot easier to just bump up the block size for the interim to say, 4MB. Now we have to wait for years for the LN to be

completed and this pose inherit risks, because of untested new code in a real time environment.   

Thanks for leaving the site link.

We also wrote up a research article on the Lightning Network.

You can read the full thing here: Lightning Network Could Be Bitcoin's Scaling Solution

from the bitcoin network prospective
the fee would still be one standard(https://bitcoinfees.21.co/) bitcoin tx fee to lock funds in. and one standard bitcoin tx fee to settle
(just like any other onchain transaction requires these days)

but the way to think of it would be. if you done 100 trades in LN you have not have had to pay the standard bitcoin fee 99 times.
ofcourse i presume a negative interest malicious hub could ask for a little extra for himself, and i presume the guys making a particular software for such will want a cut too..
but from bitcoins network prospective, just standard bitcoin fees to lockin and settle.

SO, what are the fees? When's your expected launch? Do off bitcoin transactions come with greater risk or is this an anonymity play?

We have to ask twice? Come on guys! Thanks, sounds like a great start.

yes escrow can be another use.
also faucets.
also exchanges.
also gambling sites

EG faucet puts in 0.1.. customer puts in 0.00000010 (total 0.10000010)
then every 10 minute when a customer raids a faucet, the faucet owner puts 500sats in favour of customer

and so on every 10 minutes until they want to settle.
that way it saves on many thousands of "spam" transactions of 500sat ever being seen on the blockchain
(knitpickers: yes i know 10 sat tx and 500sat tx's are already ignored as "too small" onchain, i was just using it for illustrative purposes where bitcoins value may increase to no longer treat 10-500 as too small, but doesnt spam the blockchain every 10 minutes)

I just understanding it more onto the escrow network... because the two person a and b is putting their money into the same place (X) and then after the amount of A and B is already holding by the network (X). this is just like an escrow system?correct me if i'm wrong.

issues i see.. (adding onto last post)
bitcoins blockchain allows 1 person to sign for what they hold.
LN however is a partnership of negotiating who gets what of the multisigs holdings.
i can foresee merchants becoming the new-age banks. because customers using LN will need the merchants signature to agree. (just like a bank authorisation)

as you say malicious users: imagine a hub gets so popular people lock funds in for months on end. then the hub decides to get greedy by implementing negative interest. only agreeing to sign a tx where the hub gets an extra 1% of a trade. knowing the customer cant simply get their funds out without the hubs signature

other issues is DDoS and spam attacking hubs, because transactions are not stored in 6000 locations(nodes) and just 2(hub and customer) there are issues with that.

understandably there are major benefits of LN for faucets and gambling where customers are spending/trading multiple times a day. which would be a great benefit to speeding up some things. but LN is not the ultimate solution for everything bitcoin and its best to not throw all your funds into a multisig address "managed" by a second party, otherwise its no better than using a bank.

in short once a few issues are sorted it has a purpose in some markets as a optional service. but should not be advertised as requiring everyone lock in all their funds to LN multisigs and never use traditional transactions(unmanaged onchain) again

Franky1, thanks for taking the time to put that together. I've been digesting the LN concepts for a while and am hopeful that this can be a huge step forward for cryptocurrency. It needs some real-world testing, and motivated hackers to see what they can do trying to abuse it. I want the LN's scale and I want it now, but even more I want bitcoin safe from hacking and malicious users, so I'm just going to have to be patient. 

in simplistic terms
LN is just X parties creating a multisig by handing each other a public key (not private)
this public key creates a multisig address

they double check they are both using the same address after joining the public keys together. and then both side put in some funds.
funding the address is done onchain. but the funds are locks for xxxx blocks.
lets say they both put in 0.1btc each
which would be on the blockchain 2 transactions

now that they both have something to lose they are more willing to be honest with each other.

offchain they create a private transaction to spend the 0.2btc total by giving person A 0.1 and person B 0.1 and both sign it
this is the defacto 'refund' transaction.

then later, still privately if person A buys something. they agree that person B gets more..
by giving person A 0.099 and person B 0.101 and both sign it
obviously person B wants the extra 0.001 each purchase so he is happy to sign. and person A wont receive the goods until he signs so he is happy to sign

later person A buys something else

by giving person A 0.098 and person B 0.102 and both sign it

the first transaction can be happily forgotten as they now have a new active transaction they are happy with

later person A buys something else
by giving person A 0.097 and person B 0.103 and both sign it

and so on and so on for over lets say 90 trades.
...person A buys something else
by giving person A 0.007 and person B 0.193 and both sign it

as long as both people are online. signing it is near instant and these transactions are only stored on in the mempool of the individuals involved

after a while they decide its time to settle up. so close the link between each other and broadcast the most uptodate transaction onto the bitcoin network:

and even though there have been 93 trades between A and B. all the bitcoin blockchain sees 3 transactions (2 to setup 1 to settle)



hope this has helped people visualise the simplicity of the concept.

LN uses buzzwords like bi-directional. but because its not using a long chain of transactions that are linked to previous transactions. its more like having a pool of funds and negotiating who deserves what.
meaning person A could prove goods are not delivered and they both sign that A gets a little more and B gets a little less

however there are still a few issues that need sorting.
the private communications channel(ensure they dont lose touch or other issues)
locking initial funds in
3rd party(hubs) to mitigate disputes
parameters to settle
preventing double spends(person A sending defacto refund to get 0.1 back even after buying 93 products)

http://lightning.network/

Will erasing the confirmation of the bitcoin transaction for making is more safest and instant.

Interesting. When will the network be ready to go online?

Will it be accessible by anyone or do you need a membership or will it be based of some alt coin or some other requirement?

What recourse do people have if transactions turn out not to be instantaneous?

Speed doesn't often come without a cost, so what will transaction costs be?

Will there be a cap on transaction amounts? Perhaps the size of the transaction impacts the speed factor.

Obviously I'd love more information.

The days of near-instantaneous payment seem like something of the science fiction genre. Yet, recent undertakings in the bitcoin industry are working on solutions which may allow billions of transactions per second to be made in a model similar to the routing system employed by today’s internet infrastructure. If bitcoin is capable of scaling to billions of transactions per second by using this routing system, network scaling issues would no longer persist and a new velocity of money could empower considerable economic growth.

THE LIGHTNING NETWORK

One of the solutions currently in development for scaling the bitcoin network in order to accommodate more transactions is known as the Lighting Network. The Lightning Network proposal holds that millions or even billions of transactions could be made per second by routing payments through the blockchain rather than storing data for each individual change in ownership. With this type of payment infrastructure, parties could send transactions to each other without requiring every movement of money to be recorded in the bitcoin blockchain, potentially reducing the burden of current network payload.

The creators behind the lightning network, Joseph Poon and Tadge Dryja, envision a system where supernodes are charged with verifying large groups of transactions to the main bitcoin blockchain. These supernodes would act as “minimally trusted intermediaries” and be the custodians between the blockchain and lightning payment channels.

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