@ -34,7 +34,13 @@ Payment Channel:: a payment channel is a _financial relationship_ between two no
On-Chain/Off-Chain:: a payment is "on-chain" if it is recorded as a transaction on the Bitcoin (or other underlying) blockchain. Payments sent via payment channels between LN nodes, and which are not visible in the underlying blockchain, are called "off-chain" payments.
More detailed definitions of these and many other terms can be found in the <<gloassary>>. Throughout this book we will explain what these concepts mean and how these technologies actually work.
More detailed definitions of these and many other terms can be found in the <<glossary>>. Throughout this book we will explain what these concepts mean and how these technologies actually work.
[TIP]
====
Throughout this book you will see "Bitcoin" with the first letter capitalized, which refers to the _Bitcoin System_ and is a proper noun. You will also see "bitcoin", with a lower-case _b_, which refers the currency unit.
@ -75,13 +75,13 @@ When selecting a wallet keep in mind that even if you don't see these trade-offs
In the next section we will introduce our first user and walk through their first LN wallet setup. We have chosen a wallet that is not as easy to use as some others currently available. This is because we want to show some of the underlying complexity and introduce some of the inner workings of the wallet during our example. You may find that your ideal wallet is further towards "ease of use", by accepting some of the control and privacy trade-offs. Or perhaps you are more of a "power user" and want to run your own LN and Bitcoin nodes as part of your wallet solution.
== Alice's First LN Wallet
=== Alice's First LN Wallet
Alice is a long time Bitcoin user. We first met Alice in Chapter 1 of _"Mastering Bitcoin"_ footnote:["Mastering Bitcoin 2nd Edition, Chapter 1" Andreas M. Antonopoulos (https://github.com/bitcoinbook/bitcoinbook/blob/develop/ch01.asciidoc).], when she bought a cup of coffee from Bob's cafe, using a bitcoin transaction. Now, Alice is eager to learn about and experiment with the Lightning Network. First, she has to select an LN wallet that meets her needs.
Alice does not want to entrust custody of her bitcoin to third parties. She has learned enough about cryptocurrency to know how to use a wallet. She also wants a mobile wallet so that she can use it for small payments on-the-go, so she chooses the _Eclair_ wallet, a popular non-custodial mobile LN wallet.
=== Downloading and Installing an LN Wallet
==== Downloading and Installing an LN Wallet
When looking for a new cryptocurrency wallet, you must be careful to select a secure source for the software.
@ -127,13 +127,13 @@ The _mnemonic phrase_ is often mistakenly called a "seed". In fact, a seed is co
When Alice chooses to "Create a New Wallet", she will be shown a screen with her mnemonic phrase, which looks like the screenshot in <<eclair-mnemonic>>.
[[eclair-mnemonic]]
.Eclair Mobile: New Mnemonic Phrase
image:images/eclair-mnemonic.png["Eclair Mobile: New Mnemonic Phrase"]
In <<eclair-mnemonic>> we have purposely obscured part of the mnemonic phrase to prevent readers of this book from reusing the mnemonic.
[[mnemonic-storage]]
=== Storing the Mnemonic Safely
==== Storing the Mnemonic Safely
Alice needs to be careful to store the mnemonic phrase in a way that balances the need to prevent theft and accidental loss. The recommended way to properly balance these risks is to write two copies of the mnemonic phrase on paper, with each of the words numbered (the order matters!).
@ -152,6 +152,7 @@ After Alice initializes her Eclair Mobile wallet, she will see a brief tutorial
Alice now has an LN wallet. But, it's empty! She now faces one of the more challenging aspects of this experiment: she has to find a way to acquire some bitcoin and load it onto her Eclair wallet.
[[acquiring-bitcoin]]
==== Acquiring Bitcoin
There are several ways Alice can acquire bitcoin:
@ -201,6 +202,14 @@ Alice will see the transaction from the ATM in the "TRANSACTION HISTORY" tab of
.Alice receives bitcoin
image:images/eclair-tx1-btc.png[]
While in this example Alice used an ATM to acquire her first bitcoin, the same basic concepts would apply even if she used one of the other methods in <<acquiring-bitcoin>>. For example, if Alice wanted to sell a product or provide a professional service in exchange for bitcoin, her customers could scan the Bitcoin Address with their own wallets and pay her in bitcoin.
Similarly, if she billed a client for a service offered over the Internet, Alice could send an email or instant message with the Bitcoin Address or the QR code (or both) to her client and they could scan or paste the information into a Bitcoin wallet to pay her.
Alice could even print the QR code and affix it to a sign and display it to receive tips. An singer who receives bitcoin tips has a QR code printed and affixed to their guitar while performing!
Finally, if Alice bought bitcoin from a crypto-currency exchange, she could (and should!) then "withdraw" the bitcoin by pasting her Bitcoin Address into the exchange website. The exchange will then send the bitcoin to her address directly.
=== From Bitcoin to Lightning Network
Alice's bitcoin is now controlled by her Eclair wallet and has been recorded on the Bitcoin Blockchain. At this point, Alice's bitcoin is "on-chain", meaning that she has completed a regular Bitcoin transaction, broadcast to the entire Bitcoin network, verified by all Bitcoin nodes and "mined" (recorded) onto the Bitcoin blockchain.
This quick glossary contains many of the terms used in relation to Bitcoin. These terms are used throughout the book, so bookmark this for a quick reference.
@ -6,9 +7,10 @@ This quick glossary contains many of the terms used in relation to Bitcoin. Thes
++++
TODO:
Some additional definitions, to be cleaned up and moved into alphabetic order
Some additional definitions, to be cleaned up and moved into alphabetic order are in the commented-out area below
++++
////
* Blockchain: a single distributed ledger agreed upon by a network of participating nodes. The Lightning Network does not use a blockchain to transact, but requires transactions recorded in a blockchain in order for bitcoin to enter and leave the network.
* Channel: a channel is a financial relationship between two nodes on the Lightning Network. Two users can open a channel with each other using a Bitcoin transaction, and transact with each other by moving bitcoin from one side of the channel to the other.
@ -26,7 +28,7 @@ Some additional definitions, to be cleaned up and moved into alphabetic order
** Penalty Transaction: if one user tries to "cheat" by claiming a prior state of the channel, the other user can publish a penalty transaction to the Bitcoin blockchain, which allocates all bitcoin in that channel to them.
* Wallet: an application that manages private keys in order to send and receive bitcoin. Lightning Wallets have additional features over and above Bitcoin Wallets in that they can open and close channels, and send and receive lightning payments.
////
address::
A Bitcoin address looks like +1DSrfJdB2AnWaFNgSbv3MZC2m74996JafV+. It consists of a string of letters and numbers. It's really an encoded base58check version of a public key 160-bit hash. Just as you ask others to send an email to your email address, you would ask others to send you bitcoin to one of your Bitcoin addresses.
Andreas M. Antonopoulos
4 years ago