bitcoin locks on the blockchain are not HTLC's, the blockchain tx's are timelocked multisigs using CLTV
bitcoins on the blockchain use a different type of lock
I stand corrected. CLTVs are indeed the lock used on Bitcoin's blockchain. However, this doesn't negate the point about there being no fractional reserve or IOUs.
the HTLC's in LN are the temporary 'payment/invoice' IOU contracts
what you might want to do is read some code.
There is still an appreciable difference between an "IOU" and a transaction that has been signed and approved by both parties. It is far easier to renege on an IOU than it is to renege on a payment channel where both parties have revoked the previous commitment state. You can certainly keep calling it an IOU if you want, but I suspect I'm not the only one who will never accept such a crass definition.
HTLC's can be reneged on
HTLC's are not even bitcoin transactions (msats units) a HTLC will not broadcast to a blockchain
renegociating how much they OWE each other without actually settling up, is the very definition of an IOU
as for fractional reserves. because LN is off chain. because its not community audited and the contracts are private between 2 people. they CAN both agree privately to say they have more then they really do.
EG instead of having $10 of real balance in a channel. they can say they have $160 in a channel thus letting others outside the partnership form route through them for $160 and thus the other outside part hand over $160
a[$160:$000]b[$010:$000]c here A wants to pay C $160. but it wouldnt happen because B has only $10 hand to C
a[$160:$000]b[$160:$000]c B:C can privately agree to say B has $160 to give to C just to get A to hand B $160
yes its possible because A does not get all the private details of b:c channel
you probably are wondering why would C agree to a lie about $160 in B:C if all C can get in 'real value' is $10
well there are many reasons. hacks, blackmail, extortion, friendship, malicious intent,, future owings, previous owings
LN has no auditors its just private agreements between counterparts and yes this can be abused
pleas take some time using LN, not with a fluffy unicorn utopia hat. but a critical thinking bug spotting hat/mindset. then when you spot the bugs and flaws that can be abused. you will see not only why LN is not that great. but you will start to appreciate why bitcoin(the real bitcoin with a blockchain) IS so great.
hopefully then you will start to recognise the double spend solution the byzantine generals solution and the other features of bitcoin which before 2009 were unsolved and had cypherpunks scratching their heads for years prior trying to solve.
at this moment LN nodes are already handing out channels with funds even before the supposed pegged bitcoin blockchain transaction gets a confirm.
at this moment LN nodes are already handing out channels with funds even without a bitcoin blockchain transaction. because the entities funded each other in other methods(coinbase balance, fiat, gold, altcoin)
(research-> bitrefill: thor turbo channel)
this is where things like factories start becoming part of the conversation too. but i think you need to start on the basic research before progressing to the more detailed stuff.