4 ms·

"And all of the transaction were free", Wait? Since when are transactions free and instant? Is that part of this upgrade? The only costs are with the "bank tran

"And all of the transaction were free", Wait? Since when are transactions free and instant? Is that part of this upgrade? The only costs are with the "bank transaction"?

TekMol 5y ago
A second layer transaction does not involve the Bitcoin network. When Katy wants to pay ₿3 to Billie, Katy just sends a key (via email or some API) to Billie which enables Billie to withdraw ₿3 from the account of Katy. But Billie does not do that. Billie just keeps that message like you keep your login to your bank account. When Katy wants to pay another ₿5 to Billie, Katy sends a key to Billie which enables Billie to withdraw ₿8 from the account of Katy. Now Katy paid Billie ₿8 in two transactions. All via email, letter, telephone or - most likely - API. Nothing at all happened on the Bitcoin network.
- piaste 5y ago
  However, if nothing happens on the Bitcoin network, then the funds aren't locked down, are they? In other words, Billie has no guarantee that the key she holds will be valid tomorrow; Katy could empty that account at any time, and Billie would then hold nothing except the evidence of Katy's wrongdoing.
  - TekMol 5y ago
    Katy could empty that account at any time That would be a pretty lame virtual bank then :) Realistically, the spending conditions are either limited by time. So Billie knows she needs to withdraw until a certain date or Katy could betray her. Or the spending conditions contain a punishment for betrayal. So if Katy tries to withdraw money she assigned to Billie, Billie can intervene, get her money and punish Katy.
  - gruez 5y ago
    > However, if nothing happens on the Bitcoin network, then the funds aren't locked down, are they? they are locked down. the funds in a lightning channel are locked in a 2 of 2 multisig address, and can only be moved upon mutual consent (ie. by updating the state of the channel), or by one party after sufficient time has passed (in case of an uncooperative peer).
    - zaptrem 5y ago
      Don't LN channels require a (quite expensive) transaction to open and close?
      - gruez 5y ago
        >quite expensive Are you talking about compared to regular transactions, or because network fees (per byte) are high?
      - jimmydorry 5y ago
        Quite expensive, as in $1? That $1 enables as many transactions as you want between party A and B, of which party B may have dozens of open channels with other nodes to facilitate routing from party A to C etc.
    - tgb 5y ago
      Does this stop a double spend?
      - gruez 5y ago
        Yes, why wouldn't it? The funds are locked in a 2 of 2 multisig address.
        tgb 5y ago
        I'm confused then, doesn't this still need one transaction in the block chain for every transaction?
        HashBasher 5y ago
        No, the transaction is fully signed and can be broadcast at any time by either party to settle. It doesn't have to be broadcasted and further transactions can be done on top and they just keep it private between themselves.
        5y ago
  - kordlessagain 5y ago
    Bitcoin supports post dating transactions. The transaction can be updated between parties, off chain. Lightning Network. If a bad actor gets involved, the last transaction updated between both parties rules and is the remainder is refunded upon the timeout of the post dating. This function is provided by script: https://en.bitcoin.it/wiki/Script https://en.bitcoin.it/wiki/Script
- KptMarchewa 5y ago
  Can you send 8worthless$ using that method, then move money out of the account via normal transfer?
  - gruez 5y ago
    no, because the funds are locked down while in the lightning channel. see: https://news.ycombinator.com/item?id=29228483 https://news.ycombinator.com/item?id=29228483
- cgb223 5y ago
  > VIA email or API Isn’t this an example of a centralized bottleneck?
G3rn0ti 5y ago
Parent talks about the „Lightning Network“ — a Layer 2 scaling solution for Bitcoin. Beware: I am still a crypto noob but I am still going to try to explain how I understood the system so far. Edited: Minor terminology and typos. Roughly speaking the Lightning Network works similar to a „current account“ that businesses have between each other but does not require the actors to trust each other. The parties initiate a transaction by each one sending Bitcoin to a public multi signature address. The resulting transaction cannot be spent by any one alone. Now, this unspent transaction serves as an initial balance and opens a channel between the parties on the layer 2 network. Bitcoin may now be wired back and forth between the parties on layer 2 w/o needed to be settled individually on the Bitcoin block chain. Finally, if all parties agree by signing a second, settling transaction the resulting balance is written back to the Blockchain to whatever address the participants initially agreed upon. Theoretically, there could have been billions of Bitcoin transactions over the years on the Lightning Network which would be eventually represented by only two transactions on the chain. Now, taproot improves this scheme by introducing Schnorr signatures. Up to now every member of the multisig transaction I just talked about needed to contain the public keys of all parties which in turn needed to be verified against all their private keys. Since transactions are limited in their size, this limited the applicability of multisig transactions. Now, Schnorr signatures allow for aggregation of public keys so the transaction only needs to contain a single number instead of hundreds or thousands. Of course, this also speeds up validations of transactions. I hope this all made sense. I have yet to see practical applications of a Lightning Network „scheme“ but I heard El Salvador is using it for cheap Bitcoin transactions (although not applying Schnorr signatures yet).
- spurgu 5y ago
  Perhaps a simplification to this would be a poker night, where at the beginning of the evening everyone puts in some real money and in return get poker chips. At the end of the night people can exchange whatever chips they have left for real money.
- TekMol 5y ago
  Parent talks about the „Lightning Network“ I was not talking about the Lightning Network in particular. The LN is a system that does settlement on the Bitcoin blockchain. So is the "BMW and its suppliers" network I imagined. But this network is simpler and more customized to the needs of this particular use case. Of course using the LN would be a viable alternative to a custom solution.

"And all of the transaction were free", Wait? Since when are transactions free and instant? Is that part of this upgrade? The only costs are with the "bank transaction"?

TekMol 5y ago

A second layer transaction does not involve the Bitcoin network. When Katy wants to pay ₿3 to Billie, Katy just sends a key (via email or some API) to Billie which enables Billie to withdraw ₿3 from the account of Katy. But Billie does not do that. Billie just keeps that message like you keep your login to your bank account. When Katy wants to pay another ₿5 to Billie, Katy sends a key to Billie which enables Billie to withdraw ₿8 from the account of Katy. Now Katy paid Billie ₿8 in two transactions. All via email, letter, telephone or - most likely - API. Nothing at all happened on the Bitcoin network.

piaste 5y ago
However, if nothing happens on the Bitcoin network, then the funds aren't locked down, are they? In other words, Billie has no guarantee that the key she holds will be valid tomorrow; Katy could empty that account at any time, and Billie would then hold nothing except the evidence of Katy's wrongdoing.
- TekMol 5y ago
  Katy could empty that account at any time That would be a pretty lame virtual bank then :) Realistically, the spending conditions are either limited by time. So Billie knows she needs to withdraw until a certain date or Katy could betray her. Or the spending conditions contain a punishment for betrayal. So if Katy tries to withdraw money she assigned to Billie, Billie can intervene, get her money and punish Katy.
- gruez 5y ago
  > However, if nothing happens on the Bitcoin network, then the funds aren't locked down, are they? they are locked down. the funds in a lightning channel are locked in a 2 of 2 multisig address, and can only be moved upon mutual consent (ie. by updating the state of the channel), or by one party after sufficient time has passed (in case of an uncooperative peer).
  - zaptrem 5y ago
    Don't LN channels require a (quite expensive) transaction to open and close?
    - gruez 5y ago
      >quite expensive Are you talking about compared to regular transactions, or because network fees (per byte) are high?
    - jimmydorry 5y ago
      Quite expensive, as in $1? That $1 enables as many transactions as you want between party A and B, of which party B may have dozens of open channels with other nodes to facilitate routing from party A to C etc.
  - tgb 5y ago
    Does this stop a double spend?
    - gruez 5y ago
      Yes, why wouldn't it? The funds are locked in a 2 of 2 multisig address.
      - tgb 5y ago
        I'm confused then, doesn't this still need one transaction in the block chain for every transaction?
        HashBasher 5y ago
        No, the transaction is fully signed and can be broadcast at any time by either party to settle. It doesn't have to be broadcasted and further transactions can be done on top and they just keep it private between themselves.
        5y ago
- kordlessagain 5y ago
  Bitcoin supports post dating transactions. The transaction can be updated between parties, off chain. Lightning Network. If a bad actor gets involved, the last transaction updated between both parties rules and is the remainder is refunded upon the timeout of the post dating. This function is provided by script: https://en.bitcoin.it/wiki/Script https://en.bitcoin.it/wiki/Script
KptMarchewa 5y ago
Can you send 8worthless$ using that method, then move money out of the account via normal transfer?
- gruez 5y ago
  no, because the funds are locked down while in the lightning channel. see: https://news.ycombinator.com/item?id=29228483 https://news.ycombinator.com/item?id=29228483
cgb223 5y ago
> VIA email or API Isn’t this an example of a centralized bottleneck?

G3rn0ti 5y ago

Parent talks about the „Lightning Network“ — a Layer 2 scaling solution for Bitcoin. Beware: I am still a crypto noob but I am still going to try to explain how I understood the system so far. Edited: Minor terminology and typos. Roughly speaking the Lightning Network works similar to a „current account“ that businesses have between each other but does not require the actors to trust each other. The parties initiate a transaction by each one sending Bitcoin to a public multi signature address. The resulting transaction cannot be spent by any one alone. Now, this unspent transaction serves as an initial balance and opens a channel between the parties on the layer 2 network. Bitcoin may now be wired back and forth between the parties on layer 2 w/o needed to be settled individually on the Bitcoin block chain. Finally, if all parties agree by signing a second, settling transaction the resulting balance is written back to the Blockchain to whatever address the participants initially agreed upon. Theoretically, there could have been billions of Bitcoin transactions over the years on the Lightning Network which would be eventually represented by only two transactions on the chain. Now, taproot improves this scheme by introducing Schnorr signatures. Up to now every member of the multisig transaction I just talked about needed to contain the public keys of all parties which in turn needed to be verified against all their private keys. Since transactions are limited in their size, this limited the applicability of multisig transactions. Now, Schnorr signatures allow for aggregation of public keys so the transaction only needs to contain a single number instead of hundreds or thousands. Of course, this also speeds up validations of transactions. I hope this all made sense. I have yet to see practical applications of a Lightning Network „scheme“ but I heard El Salvador is using it for cheap Bitcoin transactions (although not applying Schnorr signatures yet).

spurgu 5y ago
Perhaps a simplification to this would be a poker night, where at the beginning of the evening everyone puts in some real money and in return get poker chips. At the end of the night people can exchange whatever chips they have left for real money.
TekMol 5y ago
Parent talks about the „Lightning Network“ I was not talking about the Lightning Network in particular. The LN is a system that does settlement on the Bitcoin blockchain. So is the "BMW and its suppliers" network I imagined. But this network is simpler and more customized to the needs of this particular use case. Of course using the LN would be a viable alternative to a custom solution.