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.
Users of the LN are able to route payments to each other at virtually no cost and in real time.
Users of the LN are able to 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, it is final and cannot be reversed: like a Bitcoin transaction, a payment on the LN can only be refunded by the recipient.
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 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 in route.
=== Motivation for the Lightning Network
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=== Lightning Network Basic Concepts
@ -31,33 +33,26 @@ Each of the people and their stories, as listed here, illustrates one or more sp
We'll be seeing them throughout this book:
consumer::
A regular consumer on the Internet or in the offline world who wants to make purchases.
Alice is a bitcoin user who wants to make fast, secure, cheap and private payments for small amount retail purchases. She buys coffee with bitcoin, using the Lightning Network
content creator / curator::
A person or platform offering content on the web.
They want to install a pay wall or get tipped by their fans and consumers.
This could even include music or video streaming on demand paying in real time.
merchants::
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.
John is a 9 year old boy from Australia, who wanted a game 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 learning, he can't charge much for his artwork. After learning about Bitcoin, he managed to setup 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. By being able to set a fair price, which would normally be considered a micropayment and as such not possible with other payment methods, and by using a global currency such as Bitcoin, John was able to sell his art work to customers all over the world and in the end buy the game console he wanted so much.
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 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 game 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 learning, he can't charge much for his artwork. After learning about Bitcoin, he managed to setup 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. By being able to set a fair price, which would normally be considered a micro-payment and as such not possible with other payment methods, and by using a global currency such as Bitcoin, John was able to sell his art work to customers all over the world and in the end buy the game console he wanted so much.
gamer::
Similar to the content creator, a gamer and live streamer would like to be tipped.
However, in gaming (and gambling) the transfer of bitcoin could be part of the game for example to trade items or to wage for bets.
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 amount for in-game items as well as earn small amounts for completing quests.
migrant::
Remittance is an important way for refugees to help their loved ones in their home country.
Characteristic for remittance is that the payments usually are cross border and relatively small.
However, they might happen on a monthly base as they are just a fraction of the monthly wage.
Farel is an immigrant, who sends money home to his family in Indonesia by working in the Middle East. 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.
professional bitcoiner::
A person who wants to earn interest on their bitcoin without the risk of lending them to other people could decide to set up routing nodes on the LN.
By providing liquidity to the LN, the routing capacities will be increased offering the chance to earn routing fees on the owned bitcoin.
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.
merchants::
Merchants live on the margin of the sold goods.
They usually pay fees for using point of sales services and several payment methods which take a fraction of the transferred money.
This directly decreases the margin on which merchants operate.
A merchant will be happy to get an additional payment method which is virtually for free to the merchant.
Andreas M. Antonopoulos
5 years ago