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This article is part 1 of the new "Catching the BlockChain train" series: After five episodes about IPFS, it's time for another exciting technology in blockchain world: A quick test to see if you paid attention: Did you expand this in your mind to Lightning Network?
Well done, you passed! I like the idea to mix hands-on playing with SW tools with reading about and understanding the technology. I'm talking about myself of course. I'm figuring this all out while I write these posts turning myself from a rookie into a beginner. Before we start, here's a glimpse of the genius of Satoshi Nakamoto: That was in ! It's an open transaction that can be replaced with new versions until the deadline.
It can't be recorded until it locks. The highest version when the deadline hits gets recorded. It could be used, for example, to write an escrow transaction that will automatically permanently lock and go through unless it is revoked before the deadline.
The feature isn't enabled or used yet, but the support is there so it could be implemented later. Apparently, he was at it again in This email, composed in April of by Mike Hearn, quotes Satoshi talking about what is now known as the LightningNetwork. If you have been following Bitcoin tech, you are most likely aware of the Lightning Network. There has been a lot of talk about the LN lately, probably because there are a couple of implementations and it seems to work.
People are already using it on top of the main Bitcoin network. And three days ago the first LN node for mainnet was announced. Here is a cool visualization of the current mainnet LN. When we are halfway this rookie guide I hope you and I to have our own node in there! Now, why is the Lightning Network so exciting?
I'm a fanboy for quite a while now, but this podcast with Elizabeth Stark and Andreas Antonopoulos got me really hooked: I encourage you to listen to the whole podcast, but if you don't, no worries, here are the points that stand out IMHO at least:. Now if that doesn't get you excited Before diving into the workings of the LN protocol and before setting up our own LN node let's try out some wallets that are available right now:.
We use the wallets on the bitcoin testnet, so to play along you'll need some testnet bitcoin tBTC. As in the old days for mainnet bitcoin, you can get them at a faucet. This faucet and this one also worked for me. If you have trouble getting testnet coins, please tweet to me , and I'll send you some. Note that testnet addresses have m , n , or 2 as a prefix. Testnet bitcoins haven't and never will have any value, but it still feels exciting to see a free This Lightning Wallet is for Android only; you can download it here: I love this wallet as it is a one-guy project in the person of Anton Kumaigorodskiy and it has some innovative features.
Setting up a Bitcoin wallet: Follow the instructions in the manual and send some testnet coins to your wallet. Note that you need a wait for the transaction to be confirmed a couple of times to proceed. Using the Lightning wallet. Select the Lightning tab and click Open new channel.
Now select a channel or search for one of the recommended channels by Anton. I picked oh hi mark as it made me feel very welcome.
Then fund the channel hey, you can fund the channel with a sub-satoshi resolution! These confirmations can take a while as it is an actual bitcoin transaction.
The amount you funded determines the maximum of the sum of the payments done through this channel. We'll dive into all this in the next episode of this guide. My first purchase was an article at yalls. Micropayments are a reality! I also bought a Blockaccino at starblocks.
A few more places where you can spend tBTC here. What happens here is that the payment is routed over a series of payment channels through a number of nodes. And all in a trustless way, with super low fees and very very fast. Watch the whole process in this Mobile Lightning wallet demo. Anton also created another useful video: When Lightning goes wrong. It describes the various scenarios when channels are closed or when payments get stuck. These are the scenarios he describes:.
A mutual cooperative closing transaction: Both peers need to be online for this to work. Forced channel closing if a peer does not respond or becomes uncooperative. The peer that forces the channel to close is "punished" by a very long waiting time for their bitcoin to become spendable.
Your peer wants to steal from you by sending a previous commitment transaction to the blockchain. We see that the peer is punished for that and gets less than he would have had he played by the rules. A last cool feature of this wallet consists of two parts: It's named Olympus , and there's a video about it here. To receive a Lightning Network payment, we need another peer so let's move on to the next LN wallet From the user's perspective this is not a wallet, but a centralized front-end to a Lightning Network node.
It keeps track of your balance, and you can access it by applying the recovery secret they provide the first time you activate your "wallet". A payment channel can be thought of as a full bottle of water: You must spend that reserve before receiving is allowed. Unspendable channel reserve is the reason you see a negative receive limit when a new channel is full. It indicates how much you need to spend before anything can be received through the channel.
So you will need to issue a new individual payment request for every incoming payment you wish to receive. Next to that, there is also a risk receiving payments on a mobile app that is not always online. The peer can attempt to steal from you by sending a previous commitment transaction.
Your LN client can only correct this if it is online at least once per day. After making some space in the channel from my mobile app, I gave it a shot. Although the steps are very smooth, the actual payment failed as HTLC. The Eclair wallet is also for Android only. It was announced in this blog post. It works more or less the same as Anton's Lightning Wallet. One difference is that it doesn't allow receiving tBTC as explained in the announcement above.
The Eclair Wallet exposes some of the technical details like the Node id Lightning Network's public identifier of the wallet and the connected peers. Node addresses have the form of some-public-key ip-address: Speaking of peers, the Eclair wallet allows connecting to multiple peers aka more than one payment channel.
If you know the Node id you can look it up in this brilliant explorer: Let me sit down a bit to let this sink in It is a cliche, but we are living in the future.
Now, let's try again if we can receive with Anton's Lightning Wallet. I have both wallets connected to the same node to make it a bit easier is it?
Unfortunately, we have no influence which channel the Eclair wallet uses. A little while later I wake up in the now: Visa can breath normal again.
The Zap wallet is a different beast; it uses a full lnd node. This wallet was first announced in this article: A Lightning Network Wallet. It has an embedded video with a walk-through that gives a good idea how it all works. But the better option is to download the wallet and play along!