Lightning Network¶

The lightning network¶

To understand the lightning network it is a good idea to understand the Lightning Payment Channel.

The lightning network leverages the bidirectional payment channel introduced by the Lightning Payment Channel. Now a network can be formed of such channels.

Multi-Hop Payments¶

Through the linking of multiple lightning channels together, Multi-Hop payments are possible. This allows to route payments untrustworthy through multiple lightning channels. So e.g. if Alice has a channel with Bob and Bob has a channel with Carol, then Alice can pay Carol without having to trust Bob.

In-Flight Outputs¶

Coins that are in-flight are part of the channel state (commitment transaction). In-Flight coins are coins which are not handled between the two parties participating in the channel but are on the route and therefore pass the channel.

Timeout¶

Since nodes on the route from sender to final recipient on the network might go offline, the sender must be capable to take back his money in this case.

Revocability¶

All payments to a party are stealable by the counter party on the channel with the revocation secret.

Hash Timelock Contracts (HTLC)¶

The Hash Timelock Contract (HTLC) is the output script of in-flight transactions. Translated to a human condition it means: "If you give me a secret within a certain time, you can take the money". The Timeout is called HTLC timeout.

Chaining HTLCs: multiple HTLCs with the same secret \(R\) can be chained (e.g. Alice can pay Emily via Bob, Carol and Dave) \(\rightarrow\) the timeouts need to decrease, typically by 6h

Lightning Fees¶

Node operating the lightning service will of course charge for forwarding payments and take a fee. The consists of a fixed base fee and a percentage fee based on the amount forwarded (defaults are 1 satoshi for the base fee and 1 millionth of the amount forwarded)

links: DSS TOC - Scaling - Index