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 * How it Works
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LIGHTNING NETWORK


 SCALABLE, INSTANT BITCOIN/BLOCKCHAIN TRANSACTIONS

 

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TRANSACTIONS FOR THE FUTURE

Instant Payments. Lightning-fast blockchain payments without worrying about
block confirmation times. Security is enforced by blockchain smart-contracts
without creating a on-blockchain transaction for individual payments. Payment
speed measured in milliseconds to seconds.

Scalability. Capable of millions to billions of transactions per second across
the network. Capacity blows away legacy payment rails by many orders of
magnitude. Attaching payment per action/click is now possible without
custodians.

Low Cost. By transacting and settling off-blockchain, the Lightning Network
allows for exceptionally low fees, which allows for emerging use cases such as
instant micropayments.

Cross Blockchains. Cross-chain atomic swaps can occur off-chain instantly with
heterogeneous blockchain consensus rules. So long as the chains can support the
same cryptographic hash function, it is possible to make transactions across
blockchains without trust in 3rd party custodians.

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POWERED BY BLOCKCHAIN SMART CONTRACTS

Lightning is a decentralized network using smart contract functionality in the
blockchain to enable instant payments across a network of participants.


HOW IT WORKS

The Lightning Network is dependent upon the underlying technology of the
blockchain. By using real Bitcoin/blockchain transactions and using its native
smart-contract scripting language, it is possible to create a secure network of
participants which are able to transact at high volume and high speed.

Bidirectional Payment Channels. Two participants create a ledger entry on the
blockchain which requires both participants to sign off on any spending of
funds. Both parties create transactions which refund the ledger entry to their
individual allocation, but do not broadcast them to the blockchain. They can
update their individual allocations for the ledger entry by creating many
transactions spending from the current ledger entry output. Only the most recent
version is valid, which is enforced by blockchain-parsable smart-contract
scripting. This entry can be closed out at any time by either party without any
trust or custodianship by broadcasting the most recent version to the
blockchain.

Lightning Network. By creating a network of these two-party ledger entries, it
is possible to find a path across the network similar to routing packets on the
internet. The nodes along the path are not trusted, as the payment is enforced
using a script which enforces the atomicity (either the entire payment succeeds
or fails) via decrementing time-locks.

Blockchain as Arbiter. As a result, it is possible to conduct transactions
off-blockchain without limitations. Transactions can be made off-chain with
confidence of on-blockchain enforceability. This is similar to how one makes
many legal contracts with others, but one does not go to court every time a
contract is made. By making the transactions and scripts parsable, the
smart-contract can be enforced on-blockchain. Only in the event of
non-cooperation is the court involved – but with the blockchain, the result is
deterministic.

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MORE INFORMATION


DOCUMENTS

 * Lightning Network Summary
 * “The Bitcoin Lightning Network”: Paper (PDF) DRAFT Version 0.5.9.1

Email: contact@lightning.network
The Lightning Network paper is licenced Creative Commons Attribution 4.0
International (CC BY 4.0).