Thanks for your answer, as always much appreciated. Some questions though: When routing payments, the commitment transactions are updated to reflect the routing. So for Channel 1, A's balance will be 0 BTC and B's will be 2 BTC. For Channel 2, B's balance will be 0 BTC and C's will be 2 BTC. If the commitments are broadcast, A will have 1 less BTC, B will have the same amount, just different outputs, and C will have 1 more BTC. All that happened is that 1 BTC moved from A to B on Channel 1 and 1 BTC moved from B to C on Channel 2.
That makes a lot of sense from a logical point of view. However what does sound weird is that B didn't do any transactions himself and now is out of money on channel 2! If he wants to make a payment in channel 2 he actually needs to fund it again. So if you're not doing a payment yourself but are part of a route, then it's possible money transfers from your one payment channel to your other payment channel. Hmm... To guarantee the money transfer, there are actually new outputs created called HTLC outputs. These HTLCs guarantee that all parties will get their money or the route will timeout and the original owners will get their money if the commitments are broadcast. Right What will usually happen is that the HTLCs are settled off chain once the route is complete but commitments are not actually broadcast. So the values of the respective outputs are merged.
This I dont follow, do you have an example maybe? I'm not sure what you're trying to say here. Thanks ! |
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Let's say 3 users have 2 payment channels: User A has a channel (1) with user B and user B has a channel (2) with user C. All users deposit 1 BTC into their channel. Now user A wants to pay 1 BTC to user C, routing via B. After this channel (2) gets closed. Now how do the final on-chain transactions look ?
I'm confused here. It almost can't be that channel (2) now moves 2 BTC to user C and 1 to user B, because the ledger only registered the channel as having 2 BTC in it. But the alternative would be that transactions from channel (1) into (2) would take place. But I can also not imagine this to happen, because then tons of closing transactions would be needed if I'd have routed to several other people, resulting in huge closing fees. Also it would force an on-chain transaction from channel 1 to channel 2 while channel 1 is still open.
Anybody?
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I also have just basic knowledge of how the lightning network works, but I have the impression that the transactions are only recorded on-chain when the channel is closed, and not when it's funded, but I'm not sure.
No, also the funding is registered. "In this example, while there was a total of seven transactions, only three of them were recorded on the Litecoin blockchain (the two initial 2.5 LTC deposits (one from each person), and one final withdrawal from the escrow account of 5 LTC to Jane)." https://litecoinalliance.org/lightning-network-explained/To help you understand this all you need to realize is that a payment channel is just a (Bitcoin) address. It's a special type though ('multisig') but it's still a BTC address. So if you fund it, the blockchain registers money going from your own BTC wallet to that multisig BTC address. After that you can make offchain transactions and when you're ready, the money gets moved out of that BTC address again into your own address. It's the easiest to understand when you compare a payment channel to an escrow account where 2 (or more) parties put money in, which gets released after a specific time, but during this time, the parties can agree to change the ratio to whom the money belongs. So if we start with 50/50 ratio, we can agree that after a transaction now 30% of the 'escrow account' belongs to me and 70% belongs to you. That's really all a payment channel is. |
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You really overcomplicate things. Really, from the bitcoin ledger perspective there is NO difference if you send money to me or to a payment channel. Both are just transactions from your BTC wallet to another BTC wallet.
You did not answer my questions and I love KISS so maybe you need to go back and read what I said again to understand it because from what you just said I cannot work out if your saying we need one, two or three blocks of data changed on the BC even if we do play a game of dice over the channel and we roll the dice 700 times See this link and watch the video about Bob buying Coffee from the coffee shop every day for a month https://bitcointalk.org/index.php?topic=2776719.msg28395400#msg28395400I just watched your video. The problem is that a lot of articles/video's do explain the basics but don't explain it all so that's what can be confusing. When I started learning about LN I had to read several articles and piece the info together to really figure out what's going on. This is the key though: "A payment channel is a method to make off-chain transactions between two parties. To build up one you need to transact Bitcoins on a 2-of-2-Multisig address. For example, 0.1 bitcoin. 2-of-2 means that both you and the other party have to sign a transaction to make a payment. Like with bank accounts used for your rent deposit. After both parties have transacted bitcoins to the multisig-address, they build a new transaction – for example, one who pays 0.1 bitcoin to each of them – and sign them. Now the tricky part starts; this transaction is not propagated to the Bitcoin network and not confirmed by the miners, but just shared between both parties involved in the payment channel. Instead of sending it to the network, they can modify the transaction as often as they want. These modifications of the transaction, signed by both parties, can be used to make off-chain payments." https://btcmanager.com/lightning-network-primer-pt-i-building-payment-channels/So again, the 'payment channel' is really just a BTC address. So from the ledger perspective, there's no difference if I transfer money to you directly or to the payment channel. It's just a transfer from BTC address 1 to BTC address 2. So the ledger just registers 1 BTC BTC address A ----------> BTC Address B Where BTC address B could be my wallet but it could also be a multisig address (= payment channel). This is why LN can be integrated because from the ledger perspective nothing even changes. |
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I am trying to follow you so where physical are you saying these private ledgers are held ?
20,000 servers all replicating 10,000,000 private ledgers and trying to keep in sync or
one copy in my wallet and a copy in yours if we are working without middle men (Banks)
The private ledger is 'multisig' so you can prove that I agreed to send you $1 worth in the IOU's we
are using in the private ledger and these IOU's are as good as gold because they are backed
by real BTC on the block-chain that are now locked (Cannot be moved)
You really overcomplicate things. Really, from the bitcoin ledger perspective there is NO difference if you send money to me or to a payment channel. Both are just transactions from your BTC wallet to another BTC wallet. |
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what your suggesting would in fact result in two transactions on the BC if you spent $50
Bob-BC ---------------> Temp address ----------->Alice-BC
Monday Friday
That's how LN works. A payment channel is really nothing more than a specific type of a BTC address: it's 'multisig' which means it needs more than 1 signature. And there is a contract stating how much in the channel is mine and how much is yours. Think of it as an escrow account that gets released after, say, 1 month, but in this 1 month both users can change the percentage in the escrow that belongs to me and how much belongs to you. An example: Let's say we both open a payment channel and we both wire 1 BTC into it. That's 2 onchain transactions, 1 from me into the payment channel and one from you. Now the channel is open, we have 2 BTC in it and the relationship is 50/50. Now we do a bet for 0.25 BTC. You win the bet. So now 1.25 BTC in the payment channel money is yours and 0.75 is mine. We both sign that 'transaction', so we agree that that's the new status of our common money. We keep on betting and I lose time after time. Now 100% of the payment channel is yours. Now we close the payment channel and one ON CHAIN transaction takes place, where the 2 BTC from the payment channel is transfered to your BTC wallet. That's all there is to it. So in this case there were 3 on chain transactions and we've betted several times, these were free each time. But in the end our bets did cost 3x miner fee. |
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Correct and it locks an amount for Bob and Alice on the chain (I assume that will be free, lock manager)
Nothing is locked on the chain. A payment channel is really nothing more than a specific type of a BTC address. So when you open a channel, you simply wire money from your own BTC address into that BTC address, that's all there is to it. |
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LN is nothing special and person who already has vague knowledge about cryptocurrency should get the idea without a problem.
It's far more complicated. Crypto currency is easy cause it's pretty much like traditional banking. LN is far more complicated. Even when all the tech terms are hidden behind a simple GUI: How to check if a user in a channel defrauds you ? What to do when you're defrauded? How long do you have to respond to fraud? With whom to open channels? How to manage your money over all your open channels? How much does a transaction cost? When does the channel expire? How to indicate that I don't want to open up my channel for routing? How to sign for a transaction? Etc etc etc |
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Do you think a bank is going to let you pump 100 transactions a hour through them given that they too are
forced to pay fees and won't charge you this fee plus a profit margin and you might be nice and don't mind
lending your BTC out in the private ledger with me for free but banks don't work like that so in effect deposits of
opening a channel do not pass up the chain so even if I deposited $1000 with you then it does not mean that
you can spend $1499 with bank one.
The idea is that everybody who functions as a hub in a route gets a small fee for it. So you gain like 'interest' on your money that serves as a hub. I don't see a problem in this part. |
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It's likely that if the lightning network proves too complicated for users
Great point, I added it to my opening post. Most people here don't even understand how LN works. How are you going to explain all this to your mother or grandmother? For something like this to become mainstream it has to be simple to explain and to use and that's really not the case here. |
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so we will see it growing exponentially reaching easily hundreds of thousand of nodes, so what does it matter if a channel has not enough funds? you just
use more than one
Every channel you open is an on-chain transaction so you pay high fees. Besides that, who wants to have money locked up in several channels? That's just a horrible situation. |
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Apart from half of the points you state are just untrue
Which points are untrue? |
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I have basic information about Lightning Network : the chains can support the same cryptographic hash function, it is possible to make transactions across blockchains without trust in 3rd party custodians(not broadcast to the blockchain). [1]people can fund them channels (like fees) which can change constantly.
what will happens if a lot of people fund them channels at the same time?. Will back to the same problem (high fees)?. also, creating large payment channels can support decentralization? I'm pretty sure that every funding transaction is on chain. It's simply a transaction between a user and a shared BTC address (the channel). So if 100 users fund a channel that's 100 on-chain transactions. I don't see any other way this could happen. |
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Wait, I'm not following you. Let's say Alice and Bob open a channel, both put 0.1 BTC in it. They both do some payments and then Bob is broke, and Alice still has 0.02 BTC. They want to close the channel, now what's the rule regarding who pays the miner fee to close/settle the channel? I always assumed they'd just split the miner fee automatically? But since Bob lost all his money already he doesn't care about settling so unless he's forced to pay, then the payment will be for Alice ?
Well money needs to move from Bob to Alice on the main block-chain so Bob picks up the $30 miners fee and Bob has no option but to settle the bill because he (His wallet really) signed the micro transactions that happened on the private ledger to agree to payments and the $30 fee comes out his BTC on the public block-chain in this case Bob's 0.1BTC was lock on the main BC and is sent to Alice and at the same time her original 0.1BTC also gets unlocked on the BC as an atomic transaction so maybe Bob and Alice were forced to leave $30 in the main BC for each new channel they open to cover the $30 miners fees, sorry not sure. Sorry if I misunderstand you but it seems you don't understand the concept of LN (maybe you do but then I don't understand your post). The money doesn't move 'on chain' from Bob to alice. Both deposit 0.1 BTC into their channel, THAT is an on-chain transaction. When everything is settled the money needs to move from the channel to, in this case, Alice. What I don't know though is how these fees are divided. Do both pay $30 for opening the channel (when they both wire money into the channel) ? I think this might be the case since both move money into the channel, so that's 2 transactions on-chain (one on-chain transaction from Alice and one on-chain from Bob, both into the channel). When closing 1 transactions from the channel to Alice takes place, but who pays for this one ? |
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* The maximum amount you can pay in a certain route is determined by the guy with the LEAST amount of money in his channel
* Users can defraud each other in a channel, so they have to continually check if somebody is defrauding them.
* Unless you have a direct channel to your target, there is NO guarantee AT ALL that you can pay the person you want to pay.
* Users need to be online 24/7 if they want to be part of a payment route. If a user is offline, this particular route is not possible which of course has huge impact on the possible routes.
* Insane amounts of data are being sent because the network needs to be aware of EVERYBODY's payment channel's state (otherwise it can't discover a route)
* You still have huge fees if you want to wire money into/outside the channel.
* It's not feasible at all for bigger payments. Let's say you have to pay $1500 rent/month, are you going to open a payment channel and deposit 3 years rent in it ? Most people have difficulties enough coughing up the next month. But if you have to wire every payment into the channel, then you could just as well pay on-chain because you're paying that exact same on-chain fee.
* It's also not feasible for very small payments/channels. If you open a $30 channel with your coffeeshop to buy a few cups of coffee per week, then the price of your coffee doubles because of the huge fees to open/close the channel. Your only option is to route and HOPE there IS a route.
* Who is going to lock up his money in several channels anyway ? Liquidity, needed for routing money, is going to be a problem
* Very difficult to use and explain to users. No way your mother let alone grandmother is going to understand all this.
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I'm confused, who pays the miner fee for opening/closing the channel? Isn't this split according to the funding ratio?
Regardless, even if they'd split the fees, it's quite expensive.
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but what is there to suggest that LN is a joke and won't turn bitcoin back in to a viable option?
For example: * The maximum amount you can pay in a certain route is determined by the guy with the LEAST amount of money in his channel * Users can defraud each other in a channel, so they have to continually check if somebody is defrauding them. * Unless you have a direct channel to your target, there is NO guarantee AT ALL that you can pay the person you want to pay. * Users need to be online 24/7 if they want to be part of a payment route. If a user is offline, this particular route is not possible which of course has huge impact on the possible routes. * Insane amounts of data are being sent because the network needs to be aware of EVERYBODY's payment channel's state (otherwise it can't discover a route) * You still have huge fees if you want to wire money into/outside the channel. * It's not feasible at all for bigger payments. Let's say you have to pay $1500 rent/month, are you going to open a payment channel and deposit 3 years rent in it ? Most people have difficulties enough coughing up the next month. But if you have to wire every payment into the channel, then you could just as well pay on-chain because you're paying that exact same on-chain fee. * It's also not feasible for very small payments/channels. If you open a $30 channel with your coffeeshop to buy a few cups of coffee per week, then the price of your coffee doubles because of the huge fees to open/close the channel. |
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My cats aren't dead yet  Your brain is though. Never have read so much nonsense in 1 post. |
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3. Channel closes and my "mini block" is sent in to chain. Do I pay another fee for this?
During settlement with the hub/bank the balance left in the private ledger gets release so even if you have $0.01 left in credit then it gets written to the BTC public block-chain and the hub has to pay the $30 to the miners and locks are then released in the BC that were created when you made a deposit Remember they are selling lightning to us as if Bob , Alice and David create these money conduits that they call channels and you better hope that Alice is happy to act as a charity hub for you when she gets hit with having to pay the miners this $30 transaction fee. if you on the other hand owe $0.01 to the Alice then you get to pick up the $30 bill and believe me I have not even started to blow holes in this deception that they have planned for us. Yes sure anyone can become a hub if they keep the software running all day, have lots of hardware and tons of BTC to finance the private ledger plus high speed internet connections so that will be the current miners becoming bankers won't it then Wait, I'm not following you. Let's say Alice and Bob open a channel, both put 0.1 BTC in it. They both do some payments and then Bob is broke, and Alice still has 0.02 BTC. They want to close the channel, now what's the rule regarding who pays the miner fee to close/settle the channel? I always assumed they'd just split the miner fee automatically? But since Bob lost all his money already he doesn't care about settling so unless he's forced to pay, then the payment will be for Alice ? |
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