The "native Segwi v0" script address format, P2WSH addresses are bech32-encoded and start with "bc1q".
Pay To Taproot (P2TR)::
Pay-to-Taproot (P2TR)::
Activating in November 2021, Taproot is a new output type that locks bitcoin to a tree of spending conditions, or a single root condition.
P2TR address::
@ -314,12 +314,12 @@ payment channel::
A payment channel is a financial relationship between two nodes on the Lightning Network, created using a bitcoin transaction paying a multisignature address.
The channel partners can use the channel to send bitcoin back and forth between each other without committing all of the transactions to the Bitcoin blockchain.
In a typical payment channel only two transactions, the funding transaction and the commitment transaction, are added to the blockchain.
Payments sent across the channel are not recorded in the blockchain and are said to occur "off-chain".
Payments sent across the channel are not recorded in the blockchain and are said to occur "off-chain."
payment layer::
The top and fifth layer of the Lightning Network protocol suite operates on top of the routing layer.
Its responsibility is to enable the Payment process via BOLT #11 invoices.
While it heavily uses the Channel Graph from the Gossip Protocol as defined in BOLT #7 the actual strategies to deliver a payment are not part of the specification of the Protocol and left to the implementations.
Its responsibility is to enable the payment process via BOLT #11 invoices.
While it heavily uses the channel graph from the gossip protocol as defined in BOLT #7, the actual strategies to deliver a payment are not part of the specification of the protocol and are left to the implementations.
As this topic is very important to ensure reliability of the payment delivery process, we included it in this book.
peer::
@ -327,22 +327,22 @@ peer::
peer-to-peer layer::
The peer-to-peer layer is the third layer of the Lightning Network protocol suite and works on top of the messaging layer.
It is responsible for defining the syntax and semantics of information exchanged between peers via Lightning Messages.
This consists of control messages as defined in BOLT #9, channel establishment, operation and closing messages as defined in BOLT #2 as well as gossip and routing messages as defined in BOLT #7.
It is responsible for defining the syntax and semantics of information exchanged between peers via Lightning messages.
This consists of control messages as defined in BOLT #9; channel establishment, operation, and closing messages as defined in BOLT #2; as well as gossip and routing messages as defined in BOLT #7.
private channel::
A channel not announced to the rest of the network.
Technically "private" is a misnomer because these channels can still be identified through routing hints and commitment transactions.
Technically, "private" is a misnomer because these channels can still be identified through routing hints and commitment transactions.
They are better described as "unannounced" channels.
With an unannounced channel, the channel partners can send and receive payments between each other as normal.
However, the rest of the network will not be aware of the channel and so cannot typically use it to route payments.
Because the number of and capacity of unannounced channels is unknown, the total public channel count and capacity only accounts for a portion of the total Lightning Network.
Because the number and capacity of unannounced channels is unknown, the total public channel count and capacity only accounts for a portion of the total Lightning Network.
preimage::
In the context of cryptography and specifically in the Lightning Network, the preimage refers to the input of a hash function that produces a specific hash. It is not feasible to compute the preimage from the hash (hash functions only go one way). By selecting a secret random value as a preimage and calculating its hash, we can commit to that preimage and later reveal it. Anyone can confirm that the revealed preimage correctly produces the hash.
Proof of Work (PoW)::
Data that requires significant computation to find, and can be verified by anyone easily to prove the amount of work that was required to produce it.
Data that requires significant computation to find, and can be easily verified by anyone to prove the amount of work that was required to produce it.
In Bitcoin, miners must find a numeric solution to the SHA-256 algorithm that meets a network-wide target, called the difficulty target.
See _Bitcoin mining_ for more information.
@ -350,14 +350,14 @@ Point Time-Locked Contract (PTLC)::
A Point Time-Locked Contract (PTLC) is a Bitcoin script that allows a conditional spend either on the presentation of a secret or after a certain blockheight has passed, similar to an HTLC. Unlike HTLCs, PTLCs do not depend on a preimage of a hash function but rather on the private key from an elliptic curve point. The security assumption is thus based on the discrete logarithm. PTLCs are not yet implemented on the Lightning Network.
relative timelock::
A relative timelock is a type of timelock which allows an input to specify the earliest time the input can be added to a block. The time is relative and is based on when the output referenced by that input was recorded in a block. Relative timelocks are set by the +nSequence+ transaction field and +CHECKSEQUENCEVERIFY+ (CSV) Bitcoin Script opcode, which was introduced by BIP-68/112/113.
A relative timelock is a type of timelock that allows an input to specify the earliest time the input can be added to a block. The time is relative and is based on when the output referenced by that input was recorded in a block. Relative timelocks are set by the +nSequence+ transaction field and +CHECKSEQUENCEVERIFY+ (CSV) Bitcoin Script opcode, which was introduced by BIP-68/112/113.
Revocable Sequence Maturity Contract (RSMC)::
This contract is used to construct a payment channel between two Bitcoin or LN users who do not need to trust each other.
The name comes from a sequence of states which are encoded as commitment transactions and can be revoked if wrongfully published and mined by the Bitcoin network.
The name comes from a sequence of states that are encoded as commitment transactions and can be revoked if wrongfully published and mined by the Bitcoin network.
revocation key::
Every RSMC contains two revocation keys. Each channel partner knows one revocation key. Knowing both revocation keys, the output of the RSMC can be spent within the predefined timelock. While negotiating a new channel state, the old revocation keys are shared, thereby "revoking" the old state. Revocation keys are used to disincentivize channel partners from broadcasting an old channel state.
Every RSMC contains two revocation keys. Each channel partner knows one revocation key. Knowing both revocation keys, the output of the RSMC can be spent within the predefined timelock. While negotiating a new channel state, the old revocation keys are shared, thereby "revoking" the old state. Revocation keys are used to discourage channel partners from broadcasting an old channel state.
RIPEMD-160::
RIPEMD-160 is a cryptographic hash function that produces a 160-bit (20-byte) hash.
@ -365,7 +365,7 @@ RIPEMD-160::
routing layer::
The fourth layer of the Lightning Network protocol suite operates on top of the peer-to-peer layer.
Its responsibility is to define the cryptographic primitives and necessary communication protocol to allow the secure and atomic transport of bitcoin from a sending node to a recipient node.
While BOLT #4 defines the onion format that is used to communicate transport information to remote peers with whom no direct connections exist, the actual transport of the Onions and cryptographic primitives are defined in BOLT #2.
While BOLT #4 defines the onion format that is used to communicate transport information to remote peers with whom no direct connections exist, the actual transport of the onions and cryptographic primitives are defined in BOLT #2.
topology::
The topology of the Lightning Network describes the shape of the Lightning Network as a mathematical graph. Nodes of the graph are the Lightning nodes (network participants/peers). The edges of the graph are the payment channels.
@ -374,16 +374,16 @@ topology::
Knowing the topology is of particular interest in the source-based routing process of payments in which the sender discovers a route.
satoshi::
A satoshi is the smallest unit (denomination) of bitcoin that can be recorded on the blockchain. One satoshi is 1/100 millionth (0.00000001) bitcoin and is named after the creator of Bitcoin, Satoshi Nakamoto.
A satoshi is the smallest unit (denomination) of bitcoin that can be recorded on the blockchain. One satoshi is 1/100 millionth (0.00000001) of a bitcoin and is named after the creator of Bitcoin, Satoshi Nakamoto.
Satoshi Nakamoto::
Satoshi Nakamoto is the name used by the person or group of people who designed Bitcoin and created its original reference implementation. As part of the implementation, they also devised the first blockchain database. In the process, they were the first to solve the double-spending problem for digital currency. Their real identity remains unknown.
Schnorr Signature::
Schnorr signature::
A new digital signature scheme that will be activated in Bitcoin in November 2021. It enables innovations on the Lightning Network, such as efficient PTLCs (an improvement on HTLCs).
Script, Bitcoin Script::
Bitcoin uses a scripting system for transactions called Script. Resembling the Forth programming language, it is simple, stack-based, and processed from left to right. It is purposefully Turing-incomplete, without loops or recursion.
script, Bitcoin Script::
Bitcoin uses a scripting system for transactions called Bitcoin Script. Resembling the Forth programming language, it is simple, stack-based, and processed from left to right. It is purposefully Turing-incomplete, without loops or recursion.
ScriptPubKey (aka pubkey script)::
ScriptPubKey or pubkey script, is a script included in outputs which sets the conditions that must be fulfilled for those outputs to be spent. Data for fulfilling the conditions can be provided in a signature script. See also _ScriptSig_.
The secret number that unlocks bitcoin sent to the corresponding address. pass:[<span class="keep-together">A secret</span>] key looks like this: +5J76sF8L5j​TtzE96r66Sf8cka9y44wdpJjMwCxR3tzLh3i​bVPxh+.
Segregated Witness, SegWit::
Segregated Witness (SegWit) is an upgrade to the Bitcoin protocol introduced in 2017 that adds a new witness for signatures and other transaction authorization proofs. This new witness field is exempt from the calculation of the transaction ID, which solves most classes of 3rd-party transaction malleability. Segregated Witness was deployed as a soft fork and is a change that technically makes Bitcoin’s protocol rules more restrictive.
Segregated Witness (SegWit)::
Segregated Witness (SegWit) is an upgrade to the Bitcoin protocol introduced in 2017 that adds a new witness for signatures and other transaction authorization proofs. This new witness field is exempt from the calculation of the transaction ID, which solves most classes of third-party transaction malleability. Segregated Witness was deployed as a soft fork and is a change that technically makes Bitcoin’s protocol rules more restrictive.
SHA::
Secure Hash Algorithm (SHA)::
The Secure Hash Algorithm or SHA is a family of cryptographic hash functions published by the National Institute of Standards and Technology (NIST). The Bitcoin protocol currently uses SHA-256, which produces a 256-bit hash.
short channel id (scid)::
short channel ID (scid)::
Once a channel is established, the index of the funding transaction on the blockchain is used as the short channel ID to uniquely identify the channel.
The short channel ID consists of eight bytes referring to three numbers.
In its serialized form, it depicts these three numbers as decimal values separated by the letter "x" (e.g., +600123x01x00+)
@ -408,8 +408,8 @@ short channel id (scid)::
The second number (2 bytes) is the index of the funding transaction with the blocks.
The last number (2 bytes) is the transaction output.
Simplified Payment Verification (SPV)::
SPV or simplified payment verification is a method for verifying particular transactions were included in a block without downloading the entire block. The method is used by some lightweight Bitcoin and Lightning wallets.
simplified payment verification (SPV)::
SPV or simplified payment verification is a method for verifying that particular transactions were included in a block without downloading the entire block. The method is used by some lightweight Bitcoin and Lightning wallets.
source-based routing::
On the Lightning Network, the sender of a payment decides the route of the payment.
@ -444,18 +444,18 @@ transaction malleability::
transport layer::
In computer networking, the transport layer is a conceptual division of the methods used by computers (and ultimately applications) to talk to each other.
The transport layer provides communication services between computers such as flow control, verification, and multiplexing (to allow multiple applications to work on a computer at the same time).
The transport layer provides communication services between computers, such as flow control, verification, and multiplexing (to allow multiple applications to work on a computer at the same time).
unspent transaction output (UTXO)::
See _output_.
wallet::
A wallet is a piece of software that holds Bitcoin private keys. It is used to create and sign Bitcoin transactions. In the context of the Lightning Network it also holds revocation secrets of old channel state and the latest presigned commitment transactions.
A wallet is a piece of software that holds Bitcoin private keys. It is used to create and sign Bitcoin transactions. In the context of the Lightning Network, it also holds revocation secrets of old channel state and the latest presigned commitment transactions.
watchtower::
Watchtowers are a security service on the Lightning Network that monitors payment channels for potential protocol breaches.
In the case that one of the channel partners goes offline or loses their backup, a watchtower keeps their own backups and can restore their channel information.
Watchtowers are a security service on the Lightning Network that monitor payment channels for potential protocol breaches.
If one of the channel partners goes offline or loses their backup, a watchtower keeps backups and can restore their channel information.
+
They also monitor the Bitcoin blockchain and can submit a penalty transaction in the case that one of the partners tries to "cheat" by broadcasting an outdated state. Watchtowers can be run by the channel partners themselves, or as a paid service offered by a third party. Watchtowers have no control over the funds in the channels themselves.
Watchtowers also monitor the Bitcoin blockchain and can submit a penalty transaction if one of the partners tries to "cheat" by broadcasting an outdated state. Watchtowers can be run by the channel partners themselves, or as a paid service offered by a third party. Watchtowers have no control over the funds in the channels themselves.
Some contributed definitions have been sourced under a CC-BY license from the https://en.bitcoin.it/wiki/Main_Page[Bitcoin Wiki], https://en.wikipedia.org[Wikipedia], https://github.com/bitcoinbook/bitcoinbook[_Mastering Bitcoin_], or from other open source publications.
kristen@oreilly.com
3 years ago