Q: What is the Lightning Network?
A: The Lightning Network is currently under development and will become a decentralized network that enables instant off-chain transfer of bitcoin between counterparties without the need of a trusted third party. The system utilizes bidirectional payment channels that consist of multisignature addresses. One on-chain transaction is needed to open a channel and another on-chain transaction will close the channel. Once a channel is open, value can be transferred instantly between counterparties, who are exchanging normal bitcoin transactions, but without broadcasting them to the bitcoin network. New transactions will replace previous transactions and the counterparties will store everything locally as long as the channel stays open.
Q: Is Lightning open source?
A: Yes, Lightning will be open source. Anyone can review the code just like the bitcoin code.
Q: Who owns and controls the Lightning Network?
A: Similar to the bitcoin network, no one will ever own or control the Lightning Network. The code will be open source and free for anyone to download and review. Anyone who wants will be able to run a node.
Q: Who is behind the Lightning Network?
A: Joseph Poon and Thaddeus Dryja wrote The Lightning white paper. Anyone who wants can contribute with the development of code. Blockstream currently has one employee who is dedicated to Lightning development
Q: Does the LN have its own “Lightning coins”?
A: No, that’s not how the LN works. The LN will be using real bitcoin transactions with actual bitcoins in them
Q: Is the LN dependent on consensus to be implemented?
A: No, the LN builds an additional layer on top of the bitcoin network and is therefore not dependent on consensus in the bitcoin network itself.
Q: I have heard that there will be some fees involved in the LN, who will be collecting those fees?
A: Potentially everyone who runs a Lightning-node. Example: Alice wants to send money to Carol, but Alice doesn’t have an open channel with Carol. But Alice has an open channel with Bob, and Bob has an open channel with Carol. Instead of opening a new channel with Carol, Alice can route the payment trough Bob: Alice – Bob – Carol. In this scenario Bob might take a small fee.
Q: Will there be any custodial risk in the Lightning Network? Do I have to trust anyone else to hold my money?
A: No, the system is not based on trust; you remain in full control of your money. If anything goes wrong you simply broadcast your state to the bitcoin blockchain and all your money is returned to you.
Q: Does the Lightning Network have its own blockchain?
A: No, Lightning is dependent on the bitcoin blockchain. On-chain bitcoin transactions are needed to open and to close “channels” between peers (nodes) in the system. Once a channel is open, bitcoin can be sent off-chain in both directions within the channel. The transactions inside a channel are real bitcoin transactions, but they are not broadcasted to the bitcoin network as long as the channel stays open. Instead those involved store the transactions locally. This enables instant transactions and a near unlimited capacity within a channel.
Q: Will there be any form of mining in the Lightning Network?
A: No, security is provided by the bitcoin miners in underlying bitcoin network
Q: Where can I find more information about Lightning?