The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments

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by Joseph Poon and Thaddeus Dryja | Jan. 14, 2016


An in depth look at the Lightning Network's attempt to resolve the scaling conundrum. Describes a network of micropayment channels to improve scalability and hashed time-lock contracts to eliminate the counterparty of moving transactions off-chain.



The bitcoin protocol can encompass the global financial transaction volume in all electronic payment systems today, without a single custodial 3rd party holding funds or requiring participants to have any more than a computer on a home broadband connection. A decentralized system is proposed whereby transactions are sent over a network of micropayment channels (a.k.a. payment channels or transaction channels) whose transfer of value occurs off-blockchain. If Bitcoin transactions can be signed with a new sighash type which addresses malleability, these transfers may occur between untrusted parties along the transfer route by contracts which are enforceable via broadcast over the bitcoin blockchain in the event of uncooperative or hostile participants, through a series of decrementing timelocks.

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