Confused with how LN works.

[Don Pedro Dinero]

Following a discussion in a thread on our local forum about the uses of Bitcoin vs. altcoins, I had a question about how LN really works that no one was able to clarify in that thread. Therefore, I thought it would be a good idea to ask the knowledgeable people on the English forum.

I thought that in order to use LN you have to open a channel between two wallets and that this channel is opened with a transaction on the blockchain. So, for example, if I know a shopkeeper who accepts Bitcoin with LN, a channel would have to be opened between him and me, with a transaction on the blockchain, and from then on we could carry out transactions with LN. This, according to the idea I had, would make it convenient to use LN for cases where I know I am going to make repeated payments, but if for example I am travelling and I see a place where they use LN, I would not see the sense of using it for a single payment if a channel has to be opened on the blockchain beforehand.

But I have a fellow local forum member who says in that thread that he has used LN without ever opening channels, he simply downloaded the Wallet of Satoshi, funded it and uses it as he would use any other normal bitcoin wallet.

At first I doubted whether the people with whom he makes LN payments also use the Wallet of Satoshi, and then it is the wallet itself that opens the channels for them. But it seems that the payments work the same between Wallet of Satoshi and Muun at least.

So, the question I have is, if I download an LN wallet and I can use it as I would use a normal bitcoin wallet, without the need to open channels, who is in charge of opening them and how does that work?

[nc50lc]

I thought that in order to use LN you have to open a channel between two wallets and that this channel is opened with a transaction on the blockchain. So, for example, if I know a shopkeeper who accepts Bitcoin with LN, a channel would have to be opened between him and me, with a transaction on the blockchain, and from then on we could carry out transactions with LN.

There's a thing called "routing" in Lightning Network which enables you to send/receive from other users' channels.
So the channel between 'You' and 'Shopkeeper' can still send or receive from others as long as it can find a route to the recipient/sender.
Usually, opening a channel with a well-known node helps a lot with routing.

Read this thread for more info about LN: The Lightning Network FAQ

But I have a fellow local forum member who says in that thread that he has used LN without ever opening channels, he simply downloaded the Wallet of Satoshi, funded it and uses it as he would use any other normal bitcoin wallet.
-snip-
So, the question I have is, if I download an LN wallet and I can use it as I would use a normal bitcoin wallet, without the need to open channels, who is in charge of opening them and how does that work?

"Wallet of Satoshi" wallet is custodial and manages its channels internally so their users wont have to establish channels by themselves.
It's convenient but with the downside of not owning your bitcoins since it's in their custody.

[LoyceV]

So, the question I have is, if I download an LN wallet and I can use it as I would use a normal bitcoin wallet, without the need to open channels, who is in charge of opening them and how does that work?

"Wallet of Satoshi" wallet is custodial and manages its channels internally so their users wont have to establish channels by themselves.
It's convenient but with the downside of not owning your bitcoins since it's in their custody.

It's kinda like using an exchange for sending transactions: they take care of everything. Except for fees on LN are much lower, and in general people entrust LN-wallets with much lower amounts than exchanges.
That's why I don't really worry about using custodial LN wallets: it's supposed to be used for small amounts only, and it's much more convenient than opening my own channels.

[hZti]

. Except for fees on LN are much lower, and in general people entrust LN-wallets with much lower amounts than exchanges.

And that’s where the dream of a no trust decentralised currency dies.. lightning solves a flaw of bitcoin, but introduces a much greater flaw. Crazy when you think about it, but mostly it’s due to the resistance of the bitcoin development team that does not want to increase block size, like satoshi planned it from the beginning.

[LoyceV]

. Except for fees on LN are much lower, and in general people entrust LN-wallets with much lower amounts than exchanges.

And that’s where the dream of a no trust decentralised currency dies..

Not really: many different custodial wallets can interact with each other, and you can still opt to run your own node, open your own channels, and send payments to people who use a custodial wallet. It's all about having a choice.
Custodial Bitcoin transactions happened long before LN even existed, think about tipping in an online casino, or sending funds to a different user on an exchange. The main difference with LN is that it's compatible with the rest of the world.

lightning solves a flaw of bitcoin, but introduces a much greater flaw. Crazy when you think about it, but mostly it’s due to the resistance of the bitcoin development team that does not want to increase block size, like satoshi planned it from the beginning.

As much as I'd like to see larger blocks, that's not a long-term solution (for scaling 10,000-fold).

[RapTarX]

I thought that in order to use LN you have to open a channel between two wallets and that this channel is opened with a transaction on the blockchain. So, for example, if I know a shopkeeper who accepts Bitcoin with LN, a channel would have to be opened between him and me, with a transaction on the blockchain, and from then on we could carry out transactions with LN. This, according to the idea I had, would make it convenient to use LN for cases where I know I am going to make repeated payments, but if for example I am travelling and I see a place where they use LN, I would not see the sense of using it for a single payment if a channel has to be opened on the blockchain beforehand.

Though above answer has shared the info, I would like to add a little to make it more easier according to my understanding.
There are nodes which settle payment between two parties. Imagine, there's a popular node which most of the shopkeepers is connected with. It makes sense why would most of the shopkeepers is connected with that node.
If you and your shopkeeper is connected with that node, you can pay him. You don't need to create a lot of channels.
For reference, my topic- https://bitcointalk.org/index.php?topic=5202798.0
As you can see, my topic is a mental shortcut LOL, as I wanted to make it easier for grannies. In technical term, I can be a little wrong but in theory that's what happened actually.

[DaveF]

I thought that in order to use LN you have to open a channel between two wallets and that this channel is opened with a transaction on the blockchain. So, for example, if I know a shopkeeper who accepts Bitcoin with LN, a channel would have to be opened between him and me, with a transaction on the blockchain, and from then on we could carry out transactions with LN. This, according to the idea I had, would make it convenient to use LN for cases where I know I am going to make repeated payments, but if for example I am travelling and I see a place where they use LN, I would not see the sense of using it for a single payment if a channel has to be opened on the blockchain beforehand.

Though above answer has shared the info, I would like to add a little to make it more easier according to my understanding.
There are nodes which settle payment between two parties. Imagine, there's a popular node which most of the shopkeepers is connected with. It makes sense why would most of the shopkeepers is connected with that node.
If you and your shopkeeper is connected with that node, you can pay him. You don't need to create a lot of channels.
For reference, my topic- https://bitcointalk.org/index.php?topic=5202798.0
As you can see, my topic is a mental shortcut LOL, as I wanted to make it easier for grannies. In technical term, I can be a little wrong but in theory that's what happened actually.

Having used custodial LN wallets like WoS and running several of my own nodes too I can see a need for both.
There are some nodes that no matter what I do, short of opening my own channel to them I can't send them funds.^*
Using WoS or Blue Wallet before they shut down worked every time.

Looking at 1ml.com you could see they were only connected to a few smaller nodes and one of the larger ones. So if was tough to find a route, since for a while I only connected to smaller less connected nodes too.

^* Once I opened a channel to WoS and a few other larger ones everything worked great, but if I was locking up that much BTC in a channel I might as well just lock up less and use WoS.

-Dave

[mendace]

Exactly as LoyceV says, custodial wallets should be used for low amounts, rather consider it as your material wallet when you go out for a beer in the evening, what do you do?  Check if there is cash otherwise fill it and LN custodial should also have the same use so you avoid large sums in case yours are lost or the company that manages your funds makes a rug.  While a non-custodial implies a backup of open channels that you need to have some computer skills to be able to better manage them.  Therefore, the best solution on LN remains custodial wallets where you don't have to worry about opening channels and they can also be disposable wallets, there is no usage limit on creating new ones.