Lightning Network
The Lightning Network is an off-chain approach for solving Bitcoin scalability issues.
It is a proposed implementation, "Hashed Timelock Contracts" (HTLCs), with bi-directional payment channels which allows payments to be securely routed across multiple peer-to-peer payment channels.
This architecture of payment channels permits network formation within any peer on the network that can pay any other peer even if they do not directly have a channel open between each other which speeds up process quickly.
A prerequisite for Lightning network is enabling SegWit which solved the malleability issue (BIP141 - Segregated Witness - Consensus layer: This BIP enabled SegWit as a soft-fork in Bitcoin.
It is also prerequisite for Lightning network as it solves malleability issue of pre-segwit transaction types.
In particular, BIP141 defines the following new transaction type: P2WPKH, P2WPKH-in-P2SH, P2WSH, P2WSH-in-P2SH, where only the first two types are currently supported in Trezor. See also: BIP141 source).
Key features of the Lightning network are:
- Rapid payments
- No third-party trust
- Reduced blockchain load
- Channels can stay open indefinitely
- Rapid cooperative closes
- Outsourceable enforcement
- Onion-style routing
- Securely cross blockchains
- Multisignature capable
- Sub-satoshi payments
- Single-funded channels
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