lightningwiki.net - User contributions [en]

Lightning node

2019-01-31T12:02:06Z

2A03:E600:100:0:0:0:0:13: Redirected page to Node

#REDIRECT [[Node]]

Punishing Transaction

2019-01-31T12:00:01Z

2A03:E600:100:0:0:0:0:13: Redirected page to On-chain transactions

#REDIRECT [[On-chain transactions]]

Commitment Transaction

2019-01-31T11:59:34Z

2A03:E600:100:0:0:0:0:13: Redirected page to On-chain transactions

#REDIRECT [[On-chain transactions]]

Closing Transaction

2019-01-31T11:59:07Z

2A03:E600:100:0:0:0:0:13: Redirected page to On-chain transactions

#REDIRECT [[On-chain transactions]]

Funding Transaction

2019-01-31T11:58:41Z

2A03:E600:100:0:0:0:0:13: Redirected page to On-chain transactions

#REDIRECT [[On-chain transactions]]

FAQ

2019-01-31T11:57:24Z

2A03:E600:100:0:0:0:0:13: 1 new question, 2 typos

{{TODO|Add your question}}
{{TODO|Add frequently asked questions and their answer(s)}}

= FAQ Lists, FAQ Sites =
* [https://bitcoin.stackexchange.com/questions/tagged/lightning-network stackexchange]

= What is Lightning? =
A way of making quick peer to peer [[Payment|payments]] over the internet, backed by [[Bitcoin]] or another cryptocurrency.

= Can I use it already? / How do I use it? =
Yes, just choose a [[Wallet]]

= Why would I run a node? =
Because it is cool, and you [[Making money using Lightning|get some fees]] for routing.

= Can I run a node without putting funds into the node? =
{{TODO|Please answer}}

= Is running a node dangerous? =
Yes. Your funds are on a hot wallet, connected to the internet. Think about security.

= What is the exact content of the [[Funding Transaction]]? =
{{TODO|Please answer. What else is publicly visible in this tx?}}
It contains or references the address(es) where the funding is coming from. The "who from" so to speak. It contains or references the amount of the funds. The "how much" so to speak. It is also timestamped on the [[Bitcoin]] blockchain. This is the "when" so to speak.

= What is the exact content of the [[Closing Transaction]]? =
{{TODO|Please answer. What else is publicly visible in this tx? If one sees the Closing Tx on the blockchain, can one find the corresponding Funding Tx on the blockchain?}}
It contains or references the address(es) where the settled funds are sent to. The "to whom" so to speak. It contains or references the amount of the funds. The "how much" so to speak. It is also timestamped on the [[Bitcoin]] blockchain. This is the "when" so to speak.

= What is stored inside a [[wallet]]? =
The wallet stores a private key to the [[multisig]] address of the [[Funding Transaction]].
{{TODO|Please answer. What else is in the wallet? Does the wallet store anything about the payments going back and forth? Where are the payment [[invoices]] signed by both parties stored? Is it important to know to which Lightning node my wallet was connected to in the past?}}

= What happens if I lose my ([[non-custodial]]) wallet? =
{{TODO|Please answer. Is the 24-word wallet seed enough to restore the wallet?}}

= Can I switch the [[third-party]] [[Lightning node]] configured in my Lightning [[wallet]] any time and as frequently as I want? Or is my wallet permanently bound to the Lightning node I selected when I created my Lightning wallet? =
{{TODO|Please answer.}}

= What is stored in the [[Lightning node]]? =
{{TODO|Please answer. Is this where the payment [[invoices]] signed by both parties are stored?}}
Besides payment information the [[node]] also stored [[routing]] information.

= What happens to me as a wallet owner if the [[third-party]] [[Lightning node]] I used disappears forever? =
{{TODO|Please answer. Are funds lost? Is information about the past invoices lost? How do I know what the last wallet balance was? If I do not use a [[Watchtower]] can I be defrauded because the Lightning node went away?}}

= What information does a Lightning node operator need to restore his/her node if, say, the hard disk gets corrupted? =
{{TODO|Please answer. Are funds lost? Is information about the past invoices lost?}}

= Why is my balance changing without me sending or receiving transactions? =
There are several possibilities, it could be you are accumulating fees for routing transactions. You can check this with 'lncli feereport'

Another likely possibility is [[Fees|commit fee renegotiation]]. PR's in lnd relevant to this issue:
* [https://github.com/lightningnetwork/lnd/pull/2075 "contractcourt: settle invoice when claiming HTLC on-chain"]
* [https://github.com/lightningnetwork/lnd/pull/2265 "htlcswitch: reliable HTLC tracking"]
* [https://github.com/lightningnetwork/lnd/pull/2440 "Extend ListPayments response by original invoice memo "]
* [https://github.com/lightningnetwork/lnd/pull/2473 "lnrpc+rpc: add initiator field to listchannels"]

= How can I make money using Lightning? =
[[Making money using Lightning]]

FAQ

2019-01-31T11:51:14Z

2A03:E600:100:0:0:0:0:13: added questions

{{TODO|Add your question}}
{{TODO|Add frequently asked questions and their answer(s)}}

= FAQ Lists, FAQ Sites =
* [https://bitcoin.stackexchange.com/questions/tagged/lightning-network stackexchange]

= What is Lightning? =
A way of making quick peer to peer [[Payment|payments]] over the internet, backed by [[Bitcoin]] or another cryptocurrency.

= Can I use it already? / How do I use it? =
Yes, just choose a [[Wallet]]

= Why would I run a node? =
Because it is cool, and you [[Making money using Lightning|get some fees]] for routing.

= Can I run a node without putting funds into the node? =
{{TODO|Please answer}}

= Is running a node dangerous? =
Yes. Your funds are on a hot wallet, connected to the internet. Think about security.

= What is the exact content of the [[Funding Transaction]]? =
{{TODO|Please answer. What else is publicly visible in this tx?}}
It contains or references the address(es) where the funding is coming from. The "who from" so to speak. It contains or references the amount of the funds. The "how much" so to speak. It is also timestamped on the [[Bitcoin]] blockchain. This is the "when" so to speak.

= What is the exact content of the [[Closing Transaction]]? =
{{TODO|Please answer. What else is publicly visible in this tx? If one sees the Closing Tx on the blockchain, can one find the corresponding Funding Tx on the blockchain?}}
It contains or references the address(es) where the settled funds are sent to. The "to whom" so to speak. It contains or references the amount of the funds. The "how much" so to speak. It is also timestamped on the [[Bitcoin]] blockchain. This is the "when" so to speak.

= What is stored inside a [[wallet]]? =
The wallet stores a private key to the [[multisig]] address of the [[Funding Transaction]]? =
{{TODO|Please answer. What else is in the wallet? Does the wallet store anything about the payments going back and forth? Where are the payment [[invoices]] signed by both parties stored?}}

= What happens if I lose my ([[non-custodial]]) wallet? =
{{TODO|Please answer. Is the 24-word wallet seed enough to restore the wallet?}}

= What is stored in the [[Lightning node]]? =
{{TODO|Please answer. Is this where the payment [[invoices]] signed by both parties are stored?}}
Besides payment information the [[node]] also stored [[routing]] information.

= What happens to me as a wallet owner if the [[third-party]] [[Lightning node]] is used disappears forever? =
{{TODO|Please answer. Are funds lost? Is information about the past invoices lost? How do I know what the last wallet balance was? If I do not use a [[Watchtower]] can I be defrauded because the Lightning node went away?}}

= What information does a Lightning node operator need to restore his/her node if, say, the hard disk gets corrupted? =
{{TODO|Please answer. Are funds lost? Is information about the past invoices lost?}}

= Why is my balance changing without me sending or receiving transactions? =
There are several possibilities, it could be you are accumulating fees for routing transactions. You can check this with 'lncli feereport'

Another likely possibility is [[Fees|commit fee renegotiation]]. PR's in lnd relevant to this issue:
* [https://github.com/lightningnetwork/lnd/pull/2075 "contractcourt: settle invoice when claiming HTLC on-chain"]
* [https://github.com/lightningnetwork/lnd/pull/2265 "htlcswitch: reliable HTLC tracking"]
* [https://github.com/lightningnetwork/lnd/pull/2440 "Extend ListPayments response by original invoice memo "]
* [https://github.com/lightningnetwork/lnd/pull/2473 "lnrpc+rpc: add initiator field to listchannels"]

= How can I make money using Lightning? =
[[Making money using Lightning]]

On-chain transactions

2019-01-31T11:30:22Z

2A03:E600:100:0:0:0:0:13: more links

This page lists and explains the transactions broadcast and processed by the [[Layer]]-1 [[ blockchain ]]. Currently Lightning implementations exist for the [[ Bitcoin ]] and [[ Litecoin ]] Layer-1 chains. But in the future Lightning implements might exist for many crypto currencies or blockchains. [[ On-chain ]] transactions refer to transactions permanently written to the Layer-1 blockchain (e.g. Bitcoin blockchain).

On-chain transactions are (much) slower than Lightning payments (payment transactions), since you have to wait for [[Bitcoin]] block confirmation. Payments on the Lightning Network are off-chain, i.e. they are not written to the Layer-1 blockchain.

To distinguish, operations on the [[Layer-1]] blockchain are often referred to as [[ transaction ]] and operations on the [[Layer-2]] Lightning Network as [[payments]].

Note, there are also concepts like [[ Cross-chain ]] transactions and [[ Side-chain ]] transactions which are not discussed on this page.

= [[Funding Transaction]] =
The Funding Transaction creates the channel. During this stage, funds are sent into a multisig address controlled by both Alice and Bob, the counterparties to the channel. This address can be funded as a single-payer channel or by both Alice and Bob.

= [[Commitment Transaction]] =
A transaction that spends the funding transaction. Each peer holds the other peer's signature for this transaction, so that each always has a commitment transaction that it can spend. After a new commitment transaction is negotiated, the old one is revoked.

= [[Closing Transaction]] =
The Closing Transaction closes the channel. When broadcast, the [[multisig]] address spends the funds back to Alice and Bob according to their '''agreed-upon''' channel amount.

A "Closing Transaction" is always the result of a [[Closing channels|Mutual close]].

= [[Punishing Transaction]] =
In the case where either party attempts to defraud the other, a third transaction, which punishes the attacker, will end up being broadcasted on-chain. Let’s investigate how this is possible by the way Lightning does channel updates.

Layer-3

2019-01-31T11:22:03Z

2A03:E600:100:0:0:0:0:13: Redirected page to Layers

#REDIRECT [[Layers]]

Layer-2

2019-01-31T11:21:50Z

2A03:E600:100:0:0:0:0:13: Redirected page to Layers

#REDIRECT [[Layers]]

Layer-1

2019-01-31T11:21:30Z

2A03:E600:100:0:0:0:0:13: create redirect

#REDIRECT [[Layers]]

Layers

2019-01-31T11:20:59Z

2A03:E600:100:0:0:0:0:13: /* Layer-2 */ added clarification

A [[layer]] is simply a group of functionality. The overall infrastructure is divided into layers to create abstraction, simplification and better, more well defined interfaces. The boundaries between the layers are not yet well defined, but as of 2019 one can identify the following 3 layers. There might be more layers created or subdivided in the future as the infrastructure is built out. This is ongoing work.

= [[Layer-1]] =
Layer-1 is the bottom layer providing the basis for everything. This can be seen as a [[settlement]] layer. This is implemented as a blockchain with its corresponding currency, e.g. the [[Bitcoin]] [[blockchain]] is a Layer-1 protocol. Same for Litecoin, etc. This is a layer with slow but very secure transactions that are absolutely permanent. This layer is the best defined layer.

= [[Layer-2]] =
Layer-2 sits on top of Layer-1. The Lightning Network is part of Layer-2. It provides the [[payment]] layer. This layer provides fast payment operations that are less permanent. Layer-2, i.e. the Lightning Network, uses the Layer-1 occasionally to settle the accumulated payments permanently. There might be other Layer-2 protocols in the future such as [[identity management]]. Lightning is one Layer-2 [[protocol]], but other Layer-2 protocols will be coming.

= [[Layer-3]] =
This layer is less well defined. It contains [[applications]] and could be called the [[application]] layer. Included in these applications are [[wallets]], [[custodial services]] like [[custodial]] wallets, [[exchanges]], [[micro-payment]] solutions. This layer also includes market-places, web sites and web services that build on top of Layer-2 and make use of Layer-2 APIs.

Layers

2019-01-31T11:17:26Z

2A03:E600:100:0:0:0:0:13: created page

A [[layer]] is simply a group of functionality. The overall infrastructure is divided into layers to create abstraction, simplification and better, more well defined interfaces. The boundaries between the layers are not yet well defined, but as of 2019 one can identify the following 3 layers. There might be more layers created or subdivided in the future as the infrastructure is built out. This is ongoing work.

= [[Layer-1]] =
Layer-1 is the bottom layer providing the basis for everything. This can be seen as a [[settlement]] layer. This is implemented as a blockchain with its corresponding currency, e.g. the [[Bitcoin]] [[blockchain]] is a Layer-1 protocol. Same for Litecoin, etc. This is a layer with slow but very secure transactions that are absolutely permanent. This layer is the best defined layer.

= [[Layer-2]] =
Layer-2 sits on top of Layer-1. The Lightning Network is part of Layer-2. It provides the [[payment]] layer. This layer provides fast payment operations that are less permanent. Layer-2, i.e. the Lightning Network, uses the Layer-1 occasionally to settle the accumulated payments permanently.

= [[Layer-3]] =
This layer is less well defined. It contains [[applications]] and could be called the [[application]] layer. Included in these applications are [[wallets]], [[custodial services]] like [[custodial]] wallets, [[exchanges]], [[micro-payment]] solutions. This layer also includes market-places, web sites and web services that build on top of Layer-2 and make use of Layer-2 APIs.

Layer

2019-01-31T11:00:14Z

2A03:E600:100:0:0:0:0:13: create redirect

#REDIRECT [[Layers]]

On-chain transactions

2019-01-31T10:59:30Z

2A03:E600:100:0:0:0:0:13: make layers links

This page lists and explains the transactions broadcast and processed by the [[Layer]]-1 [[ blockchain ]]. Currently Lightning implementations exist for the [[ Bitcoin ]] and [[ Litecoin ]] Layer-1 chains. But in the future Lightning implements might exist for many crypto currencies or blockchains. [[ On-chain ]] transactions refer to transactions permanently written to the Layer-1 blockchain (e.g. Bitcoin blockchain).

On-chain transactions are (much) slower than Lightning payments (payment transactions), since you have to wait for [[Bitcoin]] block confirmation. Payments on the Lightning Network are off-chain, i.e. they are not written to the Layer-1 blockchain.

To distinguish, operations on the [[Layer-1]] blockchain are often referred to as [[ transaction ]] and operations on the [[Layer-2]] Lightning Network as [[payments]].

Note, there are also concepts like [[ Cross-chain ]] transactions and [[ Side-chain ]] transactions which are not discussed on this page.

= Funding Transaction =
The Funding Transaction creates the channel. During this stage, funds are sent into a multisig address controlled by both Alice and Bob, the counterparties to the channel. This address can be funded as a single-payer channel or by both Alice and Bob.

= Commitment transaction =
A transaction that spends the funding transaction. Each peer holds the other peer's signature for this transaction, so that each always has a commitment transaction that it can spend. After a new commitment transaction is negotiated, the old one is revoked.

= Closing Transaction =
The Closing Transaction closes the channel. When broadcast, the multisig address spends the funds back to Alice and Bob according to their '''agreed-upon''' channel amount.

A "Closing Transaction" is always the result of a [[Closing channels|Mutual close]].

= "Punishing" transaction =
In the case where either party attempts to defraud the other, a third transaction, which punishes the attacker, will end up being broadcasted on-chain. Let’s investigate how this is possible by the way Lightning does channel updates.

Atomic swap

2019-01-31T10:53:50Z

2A03:E600:100:0:0:0:0:13: created simple

An atomic swap is a trustless operation that is an all-or-nothing transaction between two networks, two protocols, or two blockchains. An example of an atomic swap is a transfer of funds from the [[Bitcoin]] Lightning Network to the [[Litecoin]] Lightning Network. It either happens or nothing happens. It is called "atomic" because it cannot happen partially.

See all [[Cross-chain]].

On-chain

2019-01-31T10:48:21Z

2A03:E600:100:0:0:0:0:13: created redirect

#REDIRECT [[On-chain transactions]]

Cross-chain transactions

2019-01-31T10:45:04Z

2A03:E600:100:0:0:0:0:13: created redirect

#REDIRECT [[Cross-chain]]

Cross-chain

2019-01-31T10:43:37Z

2A03:E600:100:0:0:0:0:13: minor retouches

The Lightning Network can be implemented for many crypto currencies. So far, Lightning Network has been implemented for [[Bitcoin]] and [[Litecoin]].

An [[atomic swap]] functionality can be implemented between compatible Lightning Networks of different coins, creating [[cross-chain transactions]]. As an example, such cross-chain transactions allow the exchange of funds between Bitcoin and Litecoin payment channels and thereby indirectly allow the exchange between the Bitcoin and Litecoin ([[Layer-1]]) blockchains. On Nov 16, 2017 the first such atomic swap cross-chain transaction was executed.

= References =
* [https://btcmanager.com/first-successful-bitcoin-litcoin-cross-chain-transaction-completed/ news article]
* [https://bitcoinschannel.com/first-successful-bitcoin-litecoin-cross-chain-transaction-completed/ news article]
* [https://blockexplorer.com/news/lightning-network-makes-first-cross-chain-swap-from-bitcoin-to-litecoin/ news article]
* [https://www.worldcoinindex.com/news/lightning-labs-tests-its-first-cross-chain-atomic-swap-between-bitcoin-and-litecoin news article]