How Lightning Network Works

How Lightning Network Works

Lightning is a scaling solution for distributed payment networks, originally proposed for the Bitcoin blockchain. Lightning is designed to allow users to make off-chain payments through routers and hubs. Lightning even has the potential to support cross-protocol payments, such as a payment where the sender sends Bitcoins on the Bitcoin network and the recipient receives lumens on the Stellar network, without having to trust any parties in between.

Lightning is constructed from building blocks known as payment channels. The concept behind payment channels is simple but powerful. They allow users to open a channel off-chain and transact there instead of on the public ledger. Because they’re off-chain, transactions in the channel can be extremely fast and cheap, but similar to on-chain transactions, there’s no counterparty risk. When the channel participants are ready to go their separate ways, they close the channel and settle back to the public ledger. No matter what happened in-channel, the rest of the world only sees that final transaction. It’s like showing someone the last frame of a movie; from that one still, there’s no way to unpack the rest of the film.

A drab family drama about the Great Depression

Developers have begun working on payment channel designs and implementations for several chains and ledgers beyond just Bitcoin, including Ethereum and Zcash. Each platform’s channels are unique and depend on the nuances of the platform, but as a rule, any implementation will support a few basic requirements:

– No transaction submitted to the network, except when parties disengage
– No loss of funds caused by cheating parties
– No vulnerability to third-party interference
– No channel-side speed bottlenecks

Stellar, an open-source payment technology, supports a more flexible generalization of payment channels called state channels, meaning that any operation you can execute on the Stellar network (such as not only payments, but also creating, deleting, or changing permissions on accounts), you can execute within a payment channel.

Release timeline for Lightning on Stellar is:

Apr 1 BUMP_SEQUENCE pushed to a testnet
Aug 1 State channels beta implementation
Oct 1 State channels on Stellar livenet + Lightning Network beta
Dec 1 Lightning Network on Stellar livenet

Website: Stellar

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