I have made a Lightning FAQ – Feedback appreciated!

[Brandsen]

Q:
What is the Lightning Network?

A:
The Lightning Network is currently under development and will become a decentralized network that enables instant off-chain transfer of bitcoin between counterparties without the need of a trusted third party.
The system utilizes bidirectional payment channels that consist of multisignature addresses.
One on-chain transaction is needed to open a channel and another on-chain transaction will close the channel.
Once a channel is open, value can be transferred instantly between counterparties, who are exchanging normal bitcoin transactions, but without broadcasting them to the bitcoin network.
New transactions will replace previous transactions and the counterparties will store
everything locally as long as the channel stays open.


Q:
Is Lightning open source?

A:
Yes, Lightning will be open source. Anyone can review the code just like the bitcoin code.


Q:
Who owns and controls the Lightning Network?

A:
Similar to the bitcoin network, no one will ever own or control the Lightning Network.
The code will be open source and free for anyone to download and review. Anyone who wants will be able to run a node.


Q:
Who is behind the Lightning Network?

A:
Joseph Poon and Thaddeus Dryja wrote The Lightning white paper. Anyone who wants can contribute with the development of code. Blockstream currently has one employee who is dedicated to Lightning development


Q:
Does the LN have its own “Lightning coins”?

A:
No, that’s not how the LN works. The LN will be using real bitcoin transactions with actual bitcoins in them


Q:
Is the LN dependent on consensus to be implemented?

A:
No, the LN builds an additional layer on top of the bitcoin network and is therefore not dependent on consensus in the bitcoin network itself.


Q:
I have heard that there will be some fees involved in the LN, who will be collecting those fees?

A:
Potentially everyone who runs a Lightning-node.
Example:
Alice wants to send money to Carol, but Alice doesn’t have an open channel with Carol.
But Alice has an open channel with Bob, and Bob has an open channel with Carol.
Instead of opening a new channel with Carol, Alice can route the payment trough Bob:
Alice - Bob - Carol.
In this scenario Bob might take a small fee.


Q:
Will there be any custodial risk in the Lightning Network? Do I have to trust anyone else to hold my money?

A:
No, the system is not based on trust; you remain in full control of your money. If anything goes wrong you simply broadcast your state to the bitcoin blockchain and all your money is returned to you.


Q:
Does the Lightning Network have its own blockchain?

A:
No, Lightning is dependent on the bitcoin blockchain. On-chain bitcoin transactions are needed to open and to close “channels” between peers (nodes) in the system.
Once a channel is open, bitcoin can be sent off-chain in both directions within the channel.
The transactions inside a channel are real bitcoin transactions, but they are not broadcasted to the bitcoin network as long as the channel stays open.
Instead those involved store the transactions locally.
This enables instant transactions and a near unlimited capacity within a channel.

Q:
Will there be any form of mining in the Lightning Network?

A:
No, security is provided by the bitcoin miners in underlying bitcoin network


Q:
Where can I find more information about Lightning?

A:
http://lightning.network/
 
https://letstalkbitcoin.com/blog/post/lets-talk-bitcoin-286-drinks-on-a-lightning-network

https://letstalkbitcoin.com/blog/post/the-lightning-network-elidhdicacs

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[stdset]

Very good, we need to spread info on LN in such easy to understand form.
One question however. What consensus do you mean here:

Q:
Is the LN dependent on consensus to be implemented?

A:
No, the LN builds an additional layer on top of the bitcoin network and is therefore not dependent on consensus in the bitcoin network itself.

For instance, there is currently lack of consensus on whether or not Segwit should be activated. And LN depends on it.

[Jannn]

Q.
How can I use it?

[achow101]

Q:
Who is behind the Lightning Network?

A:
Joseph Poon and Thaddeus Dryja wrote The Lightning white paper. Anyone who wants can contribute with the development of code. Blockstream currently has one employee who is dedicated to Lightning development

A number of other teams are also creating their own independent implementations of LN as well. For example Blockchain.com created Thunder which is their own implementation of Lightning. IIRC Bitfury is also working on an implementation as well.

For instance, there is currently lack of consensus on whether or not Segwit should be activated. And LN depends on it.

LN does not actually depend on Segwit. However it will be easier to implement, less complicated, and more efficient with segwit deployed.

Q.
How can I use it?

Right now, you can't. There are no complete implementations of LN yet.

[Quickseller]

One on-chain transaction is needed to open a channel and another on-chain transaction will close the channel.

You will actually need to have two on-chain transactions to close a channel.

[achow101]

One on-chain transaction is needed to open a channel and another on-chain transaction will close the channel.

You will actually need to have two on-chain transactions to close a channel.

How so? The lightning paper doesn't say anything about that. In fact, it says that closing a channel can be done by broadcasting one of the many channel closing transactions that are created during each transaction in the channel.

[Quickseller]

One on-chain transaction is needed to open a channel and another on-chain transaction will close the channel.

You will actually need to have two on-chain transactions to close a channel.

How so? The lightning paper doesn't say anything about that. In fact, it says that closing a channel can be done by broadcasting one of the many channel closing transactions that are created during each transaction in the channel.

In order to ensure that the most recent closing transaction has been broadcast, the closing transaction first needs to be sent to an intermediary multisig address so the "penalty" transaction can be broadcast claiming the entire funds in the channel if the most recent closing transaction was not broadcast. 

[stdset]

One on-chain transaction is needed to open a channel and another on-chain transaction will close the channel.

You will actually need to have two on-chain transactions to close a channel.

How so? The lightning paper doesn't say anything about that. In fact, it says that closing a channel can be done by broadcasting one of the many channel closing transactions that are created during each transaction in the channel.

In order to ensure that the most recent closing transaction has been broadcast, the closing transaction first needs to be sent to an intermediary multisig address so the "penalty" transaction can be broadcast claiming the entire funds in the channel if the most recent closing transaction was not broadcast. 

That's emergency closing. Normal closing is 1 onchain tx.

[MadGamer]

When you say everyone is free to download and run a node or Lightning-node , do you mean Bitcoin Core full nodes ? or we will have to download another software to run LN node and are the fees something sure to be implemented ? are people going to actually get paid for running a node , It's like a dream coming true for those who run full nodes these days.

[fiscorcle]

Thanks. This is needed now more than ever with all the unconfirmed transactions.
I have a couple that have been stuck this way for the last 12 hours and would like this to be available as a choice now so to not have my bitcoins sitting in limbo like this.

[achow101]

When you say everyone is free to download and run a node or Lightning-node , do you mean Bitcoin Core full nodes ? or we will have to download another software to run LN node and are the fees something sure to be implemented ? are people going to actually get paid for running a node , It's like a dream coming true for those who run full nodes these days.

Lightning will probably be a separate software. A node in this case is not really a node in the sense of a full node, but rather a person who has many open channels with other people and payments can thus be routed through you. If you are a node, you could take a fee for routing payments.

[MadGamer]

Lightning will probably be a separate software. A node in this case is not really a node in the sense of a full node, but rather a person who has many open channels with other people and payments can thus be routed through you. If you are a node, you could take a fee for routing payments.

I assume we will have to download the blockchain In that case too ? If we ever implement this , are we going to have the option to do normal transaction and LN transactions just like DASH have normal and what they call Darksend or LN will be the only possibility ? If and hopefully SegWit gets activated , how much time we should wait to see this LN working ?

[achow101]

I assume we will have to download the blockchain In that case too ?

Not necessarily. You don't actually need the blockchain for Lightning. Again, a node in the context of LN is not the same as a full node.

If we ever implement this , are we going to have the option to do normal transaction and LN transactions just like DASH have normal and what they call Darksend or LN will be the only possibility ?

LN does not replace Bitcoin. You can and will still have to send normal Bitcoin transactions. LN does not replace all transactions, in fact, it only replaces some specific types of payments, repeat microtransactions.

If and hopefully SegWit gets activated , how much time we should wait to see this LN working ?

That we cannot know. Multiple teams are working on LN but it is still very much experimental and a work in progress.