@ -8,13 +8,13 @@ The first and second chapters of this book should be approachable by any reader,
=== What is the Lightning Network?
The Lightning Network (LN) is a "second layer" protocol on top of Bitcoin and other blockchains that enables fast, secure, private, trustless, and permissionless payments.
The Lightning Network (LN) is a network that operates as "second layer" protocol on top of Bitcoin and other blockchains. The Lightning Network enables fast, secure, private, trustless, and permissionless payments.
Users of the LN can route payments to each other for very low cost and in real time.
Users who transact on the LN do not need to wait for block confirmations for payments.
Once a payment on the LN has completed, usually within a few seconds, it is final and cannot be reversed: like a Bitcoin transaction, a payment on the LN can only be refunded by the recipient.
While "on-chain" Bitcoin transactions are broadcast and verified by all nodes in the network, transactions routed on the LN are transmitted between pairs of nodes and are not visible to everyone, resulting in much greater privacy.
The LN uses onion routing, similar to the protocol used by The Onion Router (TOR) privacy network, so that even the nodes involved in routing a transaction are only directly aware of their predecessor and successor en route.
Users of the Lightning Network can route payments to each other for very low cost and in real time.
Users who transact on the Lightning Network do not need to wait for block confirmations for payments.
Once a payment on the Lightning Network has completed, usually within a few seconds, it is final and cannot be reversed: like a Bitcoin transaction, a payment on the Lightning Network can only be refunded by the recipient.
While "on-chain" Bitcoin transactions are broadcast and verified by all nodes in the network, transactions routed on the Lightning Network are transmitted between pairs of nodes and are not visible to everyone, resulting in much greater privacy.
the Lightning Network uses onion routing, similar to the protocol used by The Onion Router (TOR) privacy network, so that even the nodes involved in routing a transaction are only directly aware of their predecessor and successor en route.
=== Motivation for the Lightning Network
@ -60,8 +60,8 @@ While the Lightning Network was initially conceived for Bitcoin, it is able to b
As an electronic cash system, Bitcoin preserves the three most important properties of money (medium of exchange, store of value, and unit of account).
The invention of money (and in particular Bitcoin) was primarily made to facilitate trade and enable the exchange of value between people.
However, without the LN, it would be infeasible for millions of people to concurrently use Bitcoin as a medium of exchange.
Therefore, in order to fully understand the uses of the LN, we'll examine it from the perspective of people using it.
However, without the Lightning Network, it would be infeasible for millions of people to concurrently use Bitcoin as a medium of exchange.
Therefore, in order to fully understand the uses of the Lightning Network, we'll examine it from the perspective of people using it.
In particular, the use cases will come from previous users of Bitcoin as well as people who have not used Bitcoin before.
Each of the people and their stories, as listed here, illustrates one or more specific use cases.
We'll be seeing them throughout this book:
@ -73,10 +73,10 @@ merchant::
Bob owns a coffee shop, "Bob's Cafe". "On-chain" bitcoin payments don't scale for small amounts like a cup of coffee, so he uses the Lightning Network to accept bitcoin payments almost instantaneously and for very low fees.
web designer::
Saanvi is a web designer and developer in Bangalore India. She accepts bitcoin for her work, but would prefer to get paid more frequently and so uses the Lightning Network to get paid for each small milestone she completes. With the LN, she can do more small jobs for more clients without worrying about fees or delays.
Saanvi is a web designer and developer in Bangalore India. She accepts bitcoin for her work, but would prefer to get paid more frequently and so uses the Lightning Network to get paid for each small milestone she completes. With the Lightning Network, she can do more small jobs for more clients without worrying about fees or delays.
content creator / curator::
John is a 9-year-old boy from New Zealand, who wanted a games console just like his friends. However, his dad told him that in order to buy it, he had to earn the money by himself. Now John is an aspiring artist, so he knows that while he is still improving, he can't charge much for his artwork. After learning about Bitcoin, he managed to set up a website to sell his drawings across the internet. By using the LN, John was able to charge as little as $1 for one of his drawings, which would normally be considered a micro-payment and, as such, not possible with other payment methods. Furthermore, by using a global currency such as Bitcoin, John was able to sell his artwork to customers all over the world and, in the end, buy the games console he so desperately wanted.
John is a 9-year-old boy from New Zealand, who wanted a games console just like his friends. However, his dad told him that in order to buy it, he had to earn the money by himself. Now John is an aspiring artist, so he knows that while he is still improving, he can't charge much for his artwork. After learning about Bitcoin, he managed to set up a website to sell his drawings across the internet. By using the Lightning Network, John was able to charge as little as $1 for one of his drawings, which would normally be considered a micro-payment and, as such, not possible with other payment methods. Furthermore, by using a global currency such as Bitcoin, John was able to sell his artwork to customers all over the world and, in the end, buy the games console he so desperately wanted.
gamer::
Gloria is a teenage gamer from the Philippines. She plays many different computer games, but her favorite ones are those that have an "in-game economy" based on real money. As she plays games, she also earns money by acquiring and selling virtual in-game items. The Lightning Network allows her to transact in small amounts for in-game items as well as earn small amounts for completing quests.
@ -85,16 +85,16 @@ migrant::
Farel is an immigrant who works in the Middle East and sends money home to his family in Indonesia. Remittance companies and banks charge very high fees, and Farel prefers to send smaller amounts more often. Using the Lightning Network, Farel can send bitcoin as often as he wants, with negligible fees.
software service business::
Wei is an entrepreneur who sells information services related to the Lightning Network, as well as Bitcoin and other cryptocurrencies. Wei is monetizing his API endpoints by implementing micro-payments over the Lightning Network. Additionally, Wei has implemented a liquidity provider service that rents inbound channel capacity on the LN, charging a small bitcoin fee for each rental period.
Wei is an entrepreneur who sells information services related to the Lightning Network, as well as Bitcoin and other cryptocurrencies. Wei is monetizing his API endpoints by implementing micro-payments over the Lightning Network. Additionally, Wei has implemented a liquidity provider service that rents inbound channel capacity on the Lightning Network, charging a small bitcoin fee for each rental period.
=== Getting Started
In this section, we will start by choosing the right software to demonstrate the LN and learn by example. We will examine the choices of two users who represent a common use-case for the LN. Alice, a coffee shop customer, will be using a LN wallet on her mobile device to buy coffee from Bob's Cafe. Bob, a merchant, will be using a LN node and wallet to run a point-of-sale system at his cafe so he can accept payment over the LN.
In this section, we will start by choosing the right software to demonstrate the Lightning Network and learn by example. We will examine the choices of two users who represent a common use-case for the Lightning Network. Alice, a coffee shop customer, will be using a LN wallet on her mobile device to buy coffee from Bob's Cafe. Bob, a merchant, will be using a LN node and wallet to run a point-of-sale system at his cafe so he can accept payment over the Lightning Network.
==== Lightning Nodes
The Lightning Network is accessed via software applications that can speak the Lightning Network protocol. A _Lightning Network Node_ (or simply "node") is a software application that communicates on a peer-to-peer basis with other LN nodes, forming the Lightning _Network_ itself. Nodes also include "wallet" functionality, so they can send and receive payments over the LN and on the Bitcoin network.
The Lightning Network is accessed via software applications that can speak the Lightning Network protocol. A _Lightning Network Node_ (or simply "node") is a software application that communicates on a peer-to-peer basis with other LN nodes, forming the Lightning _Network_ itself. Nodes also include "wallet" functionality, so they can send and receive payments over the Lightning Network and on the Bitcoin network.
Lightning network nodes also need access to the Bitcoin blockchain (or other blockchains for other cryptocurrencies). Users have the highest degree of control by running their own Bitcoin node and LN node.
Andreas M. Antonopoulos
5 years ago