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Sort of. It's not entirely off chain. It's hedged in that a transaction is created sending X BTC between us, we repeatedly update that transaction off chain e

Sort of. It's not entirely off chain. It's hedged in that a transaction is created sending X BTC between us, we repeatedly update that transaction off chain every time we move small amounts of money between eachother, then after Y days we submit the final transaction to the blockchain to resolve the total amounts. The idea being if one of us starts to be uncooperative, the other can just submit the transaction at its latest state so that we don't lose anything except that last update that we disagreed upon.

cbm-vic-20 5y ago
Most of the examples of Lightning that I've seen involve frequent transactions between small numbers of parties. How would this work in a retail transaction? For example, if I want to buy a cup of coffee from a shop that I visit infrequently?
- nicpottier 5y ago
  My understanding is basically there's routing and there will be centralization of channels to some extent. One way to think of LN is that it is a wallet/debit card of sorts. You transfer some amount of BTC to a Lightning channel and that becomes your wallet. You can transact with that wallet quickly/cheaply but there's always the ability for that channel to be closed and put back on the chain with the last balance in the case of disputes etc.. But as you said, coffee shop needs some path to you to make that feasible. So then you get BTCVisa (c) or whatever, which is a channel provider that has built a network of channels open with lots of vendors. If you open a channel with them then you get to benefit from getting to use the wallet you already have. There is cross-channel routing of course so maybe that doesn't happen but it seems like a natural result. LN is neat in concept, but I'm not sure I really see the point compared to Bitcoin cash or the like that just say scale on chain. I guess we'll see.
- Geee 5y ago
  It forms a network, where transactions are routed between LN nodes/channels. You have to be in the same graph with the coffee shop. If there are small separate subgraphs, they can be connected by one common node, such as an exchange. So, most likely the coffee shop has just one or a few channels open to popular exchanges or dedicated LN services. You open a channel either directly or indirectly to the same exchange / service.

cbm-vic-20 5y ago

Most of the examples of Lightning that I've seen involve frequent transactions between small numbers of parties. How would this work in a retail transaction? For example, if I want to buy a cup of coffee from a shop that I visit infrequently?

nicpottier 5y ago
My understanding is basically there's routing and there will be centralization of channels to some extent. One way to think of LN is that it is a wallet/debit card of sorts. You transfer some amount of BTC to a Lightning channel and that becomes your wallet. You can transact with that wallet quickly/cheaply but there's always the ability for that channel to be closed and put back on the chain with the last balance in the case of disputes etc.. But as you said, coffee shop needs some path to you to make that feasible. So then you get BTCVisa (c) or whatever, which is a channel provider that has built a network of channels open with lots of vendors. If you open a channel with them then you get to benefit from getting to use the wallet you already have. There is cross-channel routing of course so maybe that doesn't happen but it seems like a natural result. LN is neat in concept, but I'm not sure I really see the point compared to Bitcoin cash or the like that just say scale on chain. I guess we'll see.
Geee 5y ago
It forms a network, where transactions are routed between LN nodes/channels. You have to be in the same graph with the coffee shop. If there are small separate subgraphs, they can be connected by one common node, such as an exchange. So, most likely the coffee shop has just one or a few channels open to popular exchanges or dedicated LN services. You open a channel either directly or indirectly to the same exchange / service.