The Lightning Network is a payment-channel network used to transfer bitcoin without recording every payment individually on Bitcoin's blockchain. Participants update channel balances offchain and can settle through onchain transactions. Joseph Poon and Thaddeus Dryja described the design in a paper whose January 2016 draft sets out channels, routed payments, and enforcement using Bitcoin transactions.1

Channels and settlementReport an error

A channel begins with a funding transaction. Its participants exchange signed commitments representing how funds can be distributed. Updating the balance replaces the earlier commitment; the protocol includes a revocation mechanism to discourage publication of an obsolete state. Participants can close cooperatively or use an onchain unilateral close when cooperation fails.2

This design keeps routine balance updates away from the global ledger, while retaining onchain enforcement. It also creates obligations: channel participants must retain appropriate state and respond to attempts to settle using revoked commitments. The paper treats monitoring and the ability to publish transactions within the required time as part of the security model.1

Routing and liquidityReport an error

Payments can cross several channels rather than requiring a direct channel between every sender and recipient. Hashed timelock contracts make a payment conditional on revealing a secret before a deadline, with a timeout path if it does not complete. Lightning invoices describe payment requests, including information such as an amount and expiry.2

A channel's total capacity is different from the amount its participants can send in a particular direction. Outbound liquidity supports sending; inbound liquidity supports receiving. A payment needs an available route with sufficient liquidity, so a large aggregate network capacity does not guarantee that a particular payment will succeed. Lightning Labs documents rebalancing and channel management as operational tasks for node operators.3

Implementations and operational limitsReport an error

The BOLT specifications define interoperability between implementations. Lightning Labs announced lnd 0.4-beta on 15 March 2018, its first release with Bitcoin mainnet support. It targeted developers and technical users and recommended experimenting with small amounts during that early phase.24

Watchtowers can monitor for channel breaches while a user's node is offline. In lnd, the watchtower service must be enabled and configured; Lightning Labs recommends a separate machine and network for resilience. It is a monitoring mechanism, not a substitute for available liquidity or reliable node operation.53

See alsoReport an error

ReferencesReport an error

  1. ^ a b Poon, J. and Dryja, T. (14 January 2016). The Bitcoin Lightning Network: scalable off-chain instant payments, draft 0.5.9.2. https://lightning.network/lightning-network-paper.pdf 

  2. ^ a b c d Lightning specifications. BOLT #0: Introduction and index. https://github.com/lightning/bolts/blob/master/00-introduction.md 

  3. ^ a b Lightning Labs. Understanding liquidity. https://docs.lightning.engineering/the-lightning-network/liquidity/understanding-liquidity 

  4. ^ a b Osuntokun, O. (15 March 2018). Announcing our first Lightning mainnet release, lnd 0.4-beta!. https://lightning.engineering/posts/2018-03-15-lnd-beta/ 

  5. ^ Lightning Labs. Configuring watchtowers. https://docs.lightning.engineering/lightning-network-tools/lnd/watchtower