LIGHTNING NETWORK: THE REVOLUTIONARY PLATFORM FOR TRANSACTIONS

LET’S START WITH BITCOIN FIRST: SCALABILITY ISSUES (AND MORE)

THE SOLUTION: LIGHTNING NETWORK

LIGHTING NETWORK: SOME FURTHER CONSIDERATIONS

  1. The payment channels are a metaphor to describe a trustless mechanism which doesn’t require trust from the participants. Such mechanism is used for bitcoin transactions between two sides which are outside the Blockchain. The transactions are managed off-chains, as if they were bill of exchanges. They would have had full value if carried out on the Bitcoin ledger. Their strength is to allow transactions to happen in a cheaper and faster way. There are one directional and bidirectional payment channels. Each one has its own features. We will analyse the bi-directional channels.
  2. The Hash Time Lock Contract (HTLC) is fundamental to understand Lightning Network protocol.
    Smart Contracts can be added to the payment channels. These are programmes written using a very specific programming language (Script for Bitcoin) and they work in the exact same way in which they are written. There are no options of censorship nor manipulation.
    Hash Time Lock Contracts (HTLCs) occur when Smart Contracts are programmed to allow participants to earmark funds through a redeemable secret with an expiration date. The beneficiary of such payment creates a secret (S) and subsequently calculates its hash (H). Smart Contract then follows the rule “Whoever knows the secret S can then collect the payment”.
    This obviously exploits the intrinsic functionalities of hash. So for hash it becomes computationally expensive (basically impossible with the current resources) to search the value S that creates H. In this way, only the recipient (and whoever knows S) will be able to redeem it, without any malicious agents discovering the secret. This feature is also known as hashlock whilst timelock allows the payment to be credited back to the sender if it hasn’t been redeemed within a specific timeframe. The timeframe is agreed on the Smart Contract and blocks are mined for a specific amount of time.

OUR IMPLEMENTATION: LN.INTERLOGICA.IT NODE

ALICE, BOB AND ZOE: AN EDUCATIONAL EXAMPLE TO UNDERSTAND HOW TRANSACTIONS WORK ON LIGHTNING NETWORK

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Interlogica

Interlogica

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