Bitcoin Forum

Question:
You say that the Lightning Network is using real bitcoin transactions…
How can it be a real bitcoin transaction if it’s not recorded on the blockchain?

Short Answer:

To understand this, we first need to understand what a bitcoin transaction really is…
The fact is; That there are no “coins” in Bitcoin…
There are only signed messages and updates to the blockchain.

So let’s say that Alice is sending 1 bitcoin to Bob…
We call this a peer-to-peer transaction due to the fact that the ownership of value is transferred directly from Alice to Bob.
But Bob does not actually receive a “digital coin” from Alice.

The thing that in reality is happening; is that all the nodes in the network will update their local copy of the public ledger.
The public ledger is updated so that; the “coin” that was before registered in an address controlled by Alice, is now instead registered in an address controlled by Bob.

Long Answer:

The bitcoin transaction that Alice is sending to Bob, is in reality just a signed message that Alice is broadcasting to everybody.
The message is not only received by Bob, but it is broadcasted to all the nodes in the network.
At the time of writing there are more than 5400 so called “full nodes” in the bitcoin network.

The following steps illustrates the process that takes place when Alice is sending a bitcoin transaction to Bob:

1. When Alice is broadcasting her signed message (= bitcoin transaction), it will be picked up by some of the full nodes in the network.

2. These nodes will independently validate the message (transaction) in accordance with the consensus rules. If the nodes find the message to be valid; they will broadcast the message again so that it can be picked up by other nodes on the network.

3. Some other nodes on the network will pick up the message, and this process continues until all 5400 nodes have independently validated and re-broadcasted the message (transaction)

4. At some point a miner will succeed in constructing a valid block that includes the message (transaction) from Alice. To make this happen the miner must bear the cost of an enormous amount of electricity.

5. The miner will now broadcast this newly found block. The new block will be picked up by some of the full nodes. The nodes will independently validate the block and all its content.
By doing this they are also validating the message (transaction) from Alice for a second time.
If the nodes find the block to be valid (in accordance with the consensus rules) they will broadcast the block again so that other nodes also can receive the block.

6. Other nodes will pick up the block, validate and broadcast.
This process continues until all the nodes in the network have independently validated the block and thereby also validated the message (transaction) from Alice for a second time.
The steps above illustrate that a normal bitcoin transaction actually involves everyone on the network.
The message is independently validated two times by 5400 nodes (= 10 800 validations)

Despite this, we are still calling it a “peer-to-peer transaction” because the actual ownership of value is transferred directly from Alice to Bob*
(*But everyone still needs to help by updating their local copy of the ledger)

Conclusion:
A bitcoin transaction is just a signed message.

So let’s say that Alice wants to send 1 bitcoin to Bob within a Lightning Channel:

Alice is storing some of her money in a “2 of 2” multi-signature address.

Alice and Bob will both sign a message that transfers the ownership of 1 bitcoin from Alice to Bob.

This message is a valid bitcoin transaction, but it is not broadcasted to the bitcoin network.
Instead Alice and Bob both store the transaction (message) locally.

From Bob’s point of view, this “double-signed message” has a monetary value of 1 bitcoin.
The monetary value of 1 bitcoin comes from the fact that Bob can spend this money on-chain at any time; by simply broadcasting the message to the bitcoin network.

Bitcoin transaction = Signed message = Lightning transaction

The purpose of any monetary transaction is to change the ownership of value.

In the bitcoin network we change the ownership of value by the use of signed messages.

A Lightning transaction is a double-signed message.
This double-signed message is therefore a real bitcoin transaction.


For more FAQs on Lightning please visit:
https://medium.com/@AudunGulbrands1/lightning-faq-67bd2b957d70#.pjgghlggv

I see one problem. Until the UTXO is associated with one of Bobs addresses, meaning that he has the Bitcoin in one of his address and this is confirmed in the ledger, all he has is a very strong IOU. I would expect that in this forum you will have a hard time selling the idea of an IOU as a real Bitcoin transaction.

The Lightning Network is a ledger in it's own right, as are all promissory note systems. The difference in Lightning's system of promissory notes is that the promissory notes cannot be counterfeited, the on-chain transaction needed to open the channel ensures that.

I|m totally fine with the LN part. What bugs me is the signed massage part. A signed and not propagated massage is less safe than a confirmed transaction. Whether using LN or Bitcoin a signed massage just like an unconfirmed transaction is a promise, a strong one, but none the less just a promise. If i sell my house or something of substantial value i want to see at least one confirmation before i feel confident to own the money. Not all transactions get in the ledger. I guess what i'm saying is that just being a Bitcoin transaction has no value. Being in the blockchain does. Maybe not all will agree, but i fairly certain to not be alone with this opinion.

^^^
And I fully miss any disclaimer of LN sales people otherwise we will charge them all the losses, just in case...

On chain settlement is your friend. All second layer trash banks could do way better and more secure.

I think most people get the fact that LN tx is a physical transaction like any other, but is this a true "Bitcoin" transaction? A off-chain transaction on Xapo is also a transaction, but it only becomes a "Bitcoin" transaction once it is withdrawn from Xapo and transferred out of their centralized system. 

To me, it comes down to centralization and transparency issues that are not associated with the Blockchain.

It's not the difference that's an issue, it's the impact it will have on the current mining ecosystem. For all we know it might just kill the coin

FTFY

You sound like a miner that's about to get his lunch eaten :D All LN will do is remove even more power from the miners to behave in bad faith, they're developing a bit of a superiority complex it seems

Oh boi it's Carlton Banks. Not a miner, but a lot of them believe by directing traffic away from the traditional chain, miners might give up on mining to the point it won't support the current network, hence killing the coin. It's all speculations but the possibility is there

Do you think the corresponding drop in difficulty will attract new participants to mining (hint: it will)

Not with the current difficulty numbers. It's all economy of scale, the larger pools will stay and smaller ones gone

You have zero clue, and consequently have no business speaking in the Technical discussion sub

The drop in difficulty won't matter if you see what I'm saying, if the traffic is redirected then miners lose the incentive of fees (the thing that's designed to keep btc alive after block rewards are out) only larger farms and pools can absorb the loss

The block reward runs out around the year 2140, and on-chain tx will have plenty of demand despite 2nd layers


Please don't expect to come to the Technical discussion table if you have relatively low comprehension of the Bitcoin system

The fees should be under 10% of the Block Reward. They are way to high right now. Until the fees become crucial for miners it will take a couple of years. As a miner you can't just quit without losing money in the process. Also miners a re willing to make a loss for some time in order to get rid of the competition, so they can make more profits in the future. If miners go and the hashrate drop it will attract new miners that want to take a shot a mining.

The expectation management is fully rekt now thanks to the brain washing by blockstream : WE NEED FEES

To revert this shit is the hardest issue, not the tech.


No, fees are still not needed now. There is still enough capacity for many months and gives time for new ideas to fix scaling dynamically.

Bitcoin without lightning network, I don't have to have my private keys on a networked computer to get paid and know I have been paid. All I need is an address and a block explorer.

However to get paid via LN, I have to have a private key so I (or my software) can sign the smart contract or I can't get paid. That seems kind of dangerous to me.

Oh - and if a transaction is not in the blockchain, it's not a bitcoin transaction. With LN, a bitcoin TX will be in the blockchain (two actually if I understand it right) - the first to guarantee and lock the funds, and the second when all the micro-spending is done and the channel closed. But everything between them are LN transactions, not BTC transactions.

LN is like an alt-coin pegged to bitcoin but without the blockchain TX transparency bitcoin has. That may have privacy advantages, LN may thus be useful for laundering ill-gotten gains, but they aren't bitcoin transactions.

You can't find them in the blockchain via a transaction number.

Regular Bitcoin client use always involves having both public keys and the private keys online. You're stating the usual extreme exaggerations about Lightning; it's not designed for you to put your life savings into, it's for regular, everyday transactions. If you want to store your main cache of Bitcoins in a micropayments system, guess what? You're an idiot



So, therefore all microtransactions systems are altcoins or "not BTC". Riiiiiiiight


This sounds like some Jeff-white-socks-Garzik hand waving. In capitalism, I can do what I want with my money, that's what owning capital is all about. You don't own it if you can't choose how you use it, quit trying to boss other people around


They're Bitcoin transactions in every single way, except they don't hit the main chain unless the channel closes. That's the whole point, that's how LN saves blockchain space. If LN "is like an altcoin", then you should look forward to when this Millions of tx/s coin hits the markets (which it won't, because Lightning units are all Bitcoins anyway)


You can find them in the mempools of the nodes in their channel



Alice, can you make any arguments that don't involve absurd exaggerations? I sincerely hope no-one is using your Miscreated software, if you apply that reasoning ability to your coding

It's more than just miscreated - miscreated is a play on words, alluding to miscreant.

And no, being able to find a TX in a mempool does not make it a bitcoin transaction.

If it is not in the blockchain, it's not a bitcoin transaction.

They are an IOU to be settled later at best.

Again, you're deriding all microtransactions systems by saying that.


Of course it's like an IOU, duuhhhhhhhh. They just so happen to be cryptographically enforced IOUs ::)


So how would you define +80,000 unconfirmed Bitcoin transaction backed up in larger mempools? "Not Bitcoins" presumably.

Did you just solve the blocksize problem with semantic trickery alone? ;D






Alice, can you make any arguments that don't involve absurd exaggerations? i.e. not valid arguments at all

Yes, but a Bitcoin transaction is secured by the miners whereas an LN transaction is not. Miners serve a purpose, and not only in relation to the security of an individual transaction.

It is said that Bitcoin is deliberately hard to change (as we are finding out).

If in the future the majority of transactions are LN transactions then we are all primarily LN users, not Bitcoin users, and we are at the whim of the LN developers who have complete control to change the protocol that everyone is using to suit themselves.

What's more, as explained here: http://news.8btc.com/be-firmly-and-openly-against-segewit-and-lightning there is a possibility that LN protocol may also work with other blockchains. At this point LN is not a second layer on top of Bitcoin, LN is the primary protocol and Bitcoin is one of a number of possible second layers on top of LN; This destroys scarcity, since any number of blockchains and coins can be used within the primary network that people are using, and therefore also destroys Bitcoin as a store of value.

They aren't bitcoin transaction until they are in the blockchain.

According to that logic, the whole blocksize debate is pointless, because none of the queued transactions are Bitcoins yet anyway lol



Alice, are you even capable of making genuine technical arguments, or will you just continue to use semantic tricks?

According to that logic, if I've applied for a credit card then I must already have it.