cool hit counter How do I explain the Lightning Network to my non-tech savvy friends?_Intefrankly

How do I explain the Lightning Network to my non-tech savvy friends?


How to explain Lightning Network to your non-technical friends?

How do I explain the Lightning Network to my non-tech savvy friends?

The simplest explanation available on the internet.

The simplest explanation that can be found on the internet.

Blockchains are slow. And therefore, expensive. If I had to send you some Bitcoins, you’d receive them in about a couple of hours and I’d have paid a heavy transaction fee too. With such a reputation, how will Blockchains take over the world?

Blockchain is slow and expensive. If I send you some bitcoins, it will take about a few hours for you to receive them, and I'll have to pay a large transaction fee. In that case, how will blockchain become mainstream in the world?

Any idea that can solve the non-scalability of Blockchains is worth attention, time and effort. Lightning Network is one such idea. But before we understand the solution, we’ll need to understand the problem.

Any idea that addresses the non-scalability of the blockchain is worth the time, effort, and attention it receives. The Lightning Network is one such idea. Before we can understand this solution, we need to understand what the problem is.

If you’re already aware of the problem, you can directly jump to the next section.

If you're already aware of this problem with blockchain, you can skip straight to the next chapter.

1.Why Blockchains are slow?

1.Why is the blockchain slow?

“I am a slow walker, but I never walk back.” — Abraham Lincoln

"I walk slow, but I never back up." - Abraham Lincoln.

Think of a Blockchain as a register. And this register contains several pages (blocks) where each page has several transactions. As soon as a page has been filled with transactions, it needs to be added to the register before starting to record transactions on the next page.

Think of the blockchain as a record book. And this logbook contains several pages (blocks) of content, with several transactions recorded on each page. As soon as a page is filled with transactions, they need to be added to the logbook and then the next page of transactions is started.

Before a page (block) can be added to the register (chain), there’s some processing that needs to be done to ensure that everyone agrees with the contents it contains. The process approximately takes 10 minutes (for Bitcoin Blockchain) for each block.

Before a page (block) can be added to the logbook (chain), some processing needs to be done to ensure that everyone agrees to what is being recorded. (Bitcoin blockchain) takes about 10 minutes per block to complete these processes.

Imagine, you send 1 BTC to your friend, Joe. The transaction will look something like this.

Imagine you send 1 bitcoin to your friend Joe, and the transaction record looks like this.

Among other things, a transaction contains information about the sender, the recipient, the amount and the transaction fee.

A transaction record contains information about the sender, the recipient, the quantity, and the cost of the transaction.

2.Wait a minute, transaction fee?

2.Wait a minute, transaction fees?

“A consultant is someone who saves his client almost enough to pay his fee.” — Arnold H. Glasow

"An advisor is someone who can get his client to save enough money to then pay him" - Arnold H. Glasow

Yes, there’s an additional fee. You can pay it to incentivize miners to include your transaction in a block as soon as possible. There’s no set price and it’s entirely up to you how much you are willing to pay to speed up the process. The higher the fee, faster your transaction will go through.

Yes, there are extra costs. You can pay to incentivize miners to credit your transactions to the block as soon as possible. There is no set price here, it all depends on how much you are willing to spend to speed up the process. The higher the fee, the faster the transaction is recorded.

At any given moment, there are several transactions available to be recorded on the current page.

At any given time, it is possible to record some of the transactions that can be found on the current page.

The miners, i.e. computers working in the Blockchain network, have to decide which of the available transactions to include in the current block. To help them decide, they look at which transactions yield the most rewards — meaning that the transactions with the highest transaction fee will be included first.

The miners, or computers, working on the blockchain network must decide which recordable transactions are contained in the current block. They watch which transactions are recorded for the greatest return in order to make a decision - this means that the one with the highest fees is recorded first.

If there are enough transactions with a higher transaction fee than yours to fill up the block, your transaction will have to wait in queue. The wait can last from a few minutes to a few hours. And sometimes, even days. The more you pay in transaction fees, the Quicker your transaction is processed.

If a block fills up with enough transactions and they all cost more than you, then your transaction record will be delayed and you will need to wait in line. Such a wait can last from a few minutes to a few hours, sometimes even days. So the higher the transaction fee you pay, the faster the recording process.

That’s why Blockchains are slow, and therefore, expensive for everybody to start using. Ideally, the adoption of Blockchain would mean more transactions happening but as the number of transactions goes up, the network will become slow, making a hurdle for adoption. What a paradox!

This is why blockchain is very slow and also very expensive for people who are just starting to use it. Theoretically, the popularity of blockchain will mean more transactions happening. And as the number of transactions rises, the network becomes slow, hindering adoption. What a paradox!

Lightning Network (LN) is a potential solution to the problem.

Lightning Network (LN) is a potential solution.

3.So what is Lightning Network again?

3.So, what is the Lightning Network?

“Thunder is good, thunder is impressive; but it is lightning that does the work.” — Mark Twain

"It's nice to have thunder, the thunder is impressive, but it's the lightning that's doing the job" - Mark Twain.

The idea behind LN is that not all transactions are required to be recorded on the Blockchain.

The concept behind the Lightning Network is that there is no need for all transactions to be recorded on the blockchain.

Imagine you and I transact quite a few times among ourselves. In such a case, we can bypass recording the transactions on the Blockchain and carry them off the chain.

Imagine how many times I've traded with you. In this case, we can bypass recording on the blockchain and execute off-chain.

In the simplest terms, how it’ll work is — we’ll open something called a payment channel between us and record its opening on the Blockchain. Now, you and I can transact any number of times through this payment channel and it can stay open for any number of hours, days, weeks or decades. The only time we would touch the Blockchain ever again will be when we would want to close the channel. Then, we’ll write the final status of the transactions that occurred through the channel on the Blockchain.

Explain in the most layman's terms how it works - a payment channel is opened between us and then recorded on the blockchain. Now, I can transact between you and I through this payment channel any number of times, and the channel can exist for any length of time, hours, days, weeks or decades. The only time we need to use the blockchain is when we want to close the channel. Next, we write down the final transaction in the channel on the blockchain.

Using this idea of payment channel, we can create a network of payment channels such that it would be only rarely required to transaction on the Blockchain. Imagine there are three characters — Xan, Yelena and Zeke.

With this concept, we can create a network of payment channels so that few transactions can be made on the blockchain. Suppose now there are three people - Xan, Yelena and Zeke.

If Xan and Yelena have a payment channel opened between them and Yelena and Zeke have a payment channel opened between them, then Xan can send money to Zeke via Yelena.

Suppose Xan wants to send 2 BTC to Zeke, Yelena will send 2 BTC to Zeke and Xan will reimburse Yelena with 2 BTC.

If there is a payment channel between Xan and Yelena, and a payment channel between Yelena and Zeke, then Xan can pay Zeke through Yelena.

That’s what the idea of Lightning Network is. Because you won’t be touching the Blockchain often, the transactions will be happening at lightning speed. As you might have guessed by now, all the magic happens in the payment channels. Let’s learn the magic trick then.

This is the concept of the Lightning Network. Because the blockchain won't be used often, transactions will want to be as fast as lightning. As you may have guessed, all the magic happens on the payment channel. Next, let's get to know it.

4.And what are those payment channels?

4.What exactly are these payment channels?

“Individually, we are one drop. Together, we are an ocean.” — Ryunosuke Satoro

"As individuals, we are like a drop of water. Gathered together, we are the ocean. "-Ryunosuke Satoro

It’s like a safety deposit box where two people deposit equal amounts of money and each put a lock on it.

It is like a safe deposit box where two people deposit equal amounts of money and lock it.

This action of depositing equal amounts of money in a common box is recorded on the Blockchain in the form of an ‘Opening Transaction’ and thereafter a payment channel is open between those two people.

An equal amount of money is deposited in a common safe and then recorded on the blockchain as an "open transaction", after which there is a payment channel between the two people.

The idea behind locking money in such a box is that no one person can spend the money in the box without the other. The money in this box is then used to transact between each other.

The logic of locking the money in a safe and doing so is that another person cannot mess with the money in the box without the permission of one person. This way, the money in the safe can be used for a direct transaction between two people.

Imagine, Xan and Yelena pool in 10 BTC each in the common box. And now, if Xan wants to send 2 BTC to Yelena, how would he do that?

Imagine that Xan and Yelena each personally put 10 bitcoins in the safe. Now, if Xan wants to send 2 bitcoins to Yelena, what should he do?

To do that, he would transfer a promise of ownership for two of his Bitcoins in the common box to Yelena. After this transfer of promise, if the box is unlocked, Xan will be able to take 8 BTC from it and Yelena will be able to claim 12 BTC.

He'll transfer the voucher for the ownership of the 2 bitcoins in the safe to Yelena. After the transfer, if the box is unlocked, Xan will be able to remove 8 bitcoins and Yelena will have 12 bitcoins.

But they will not open the box because they want to continue transacting between themselves. That’s the beauty of this arrangement.

But they won't unlock the box, because they will continue to trade with each other. That's the beauty of the Lightning Network Protocol.

Now, if the next day, Yelena has to send 1 BTC to Xan, she would do the same — transfer a promise of ownership for one of her Bitcoins to Xan. After these two transactions, if the box is opened, Xan can claim 9 BTC and Yelena can get 11 BTC.

If Yelena sends 1 bitcoin to Xan the next day, she will do the same thing - transfer the 1 bitcoin ownership voucher in the safe to Xan. After these two transactions, if the box is unlocked, Xan has 9 bitcoins and Yelena has 11 bitcoins.

To imagine how off-chain transactions look like, consider this:

Imagine how an off-chain transaction would work, and think about.

To sum it up, payment channel is nothing but a combination of pooling some money together and then transferring the promise of ownership of the pooled-in money in the agreed upon manner. If ever either of Xan or Yelena wants to close the channel, they can.

In short, the payment channel is nothing more than a combination lock that gathers some funds and then transfers the ownership credentials of the funds that have been placed to others under agreed circumstances. If one of Xan or Yelena wants to close the channel, they can do so.

Closing a channel would simply mean opening up the box and taking the money inside. This opening of the box happens on the Blockchain and the who owns how much from the box is recorded forever.

Closing the access means opening the safe and taking out the money inside. The act of opening the safe happens on the blockchain and there is a permanent record of who has how much money inside the box.

That’s how payment channels work. But that doesn’t even come close to defining their true potential. Their true power is unleashed when two or more payment channels work together to form a network — The Lightning Network.

That's how payment channels work, but it doesn't define their true potential. When two or more payment channels work in tandem to form a network, known as a lightning network, the real power is unleashed.

5.Got it, so how does it actually work?

5.Got it, so how does it actually work?

“Great things are done by a series of small things brought together.” — Vincent Van Gogh

"Great causes are built up from a series of small things." -- Vincent van Gogh

LN works by moving the value from the ownership of the Bitcoins to the promise of ownership of the Bitcoins.

The Lightning Network works from the transfer of bitcoin ownership to the transfer of bitcoin ownership credentials.

This shift is huge. Like always, we will use an example to understand this. Imagine there are three people — Xan, Yelena and Zeke — such that there’s a payment channel open between Xan and Yelena, and there’s another channel open between Yelena and Zeke. Note that Xan and Zeke have no payment channel between them.

The change is huge, and as before, we can use an example to understand this. Suppose there are 3 people - Xan, Yelena and Zeke, and there is a payment channel between Xan and Yelena, a payment channel between Yelena and Zeke, and no payment channel between Xan and Zeke.

In such a situation, if Xan wants to transfer 2 BTC to Zeke, he can use the payment channel between Yelena and Zeke to do that. How does that look like?

That way, if Xan wants to transfer 2 bitcoins to Zeke, he can do it through the payment channel between Yelena and Zeke. So what should I do?

Xan asks Yelena to transfer a promise of 2 BTC to Zeke on Yelena-Zeke payment channel and then he reimburses Yelena with 2 BTC on Xan-Yelena channel.

Xan has Yelena transfer 2 bitcoin ownership credentials to Zeke via the Yelena-Zeke payment channel, and then repays 2 bitcoin ownership credentials himself on the Xan-Yelena channel.

With such network of payment channels, a huge chunk of transactions can be off-loaded from the Blockchain to be carried out off the chain, therefore, freeing up the chain’s bandwidth. Using a network of payment channels, millions of transactions can happen, and that too without a hefty transaction fee.

With such a network of payment channels, a large number of transactions can be removed from the blockchain and performed off-chain, which also frees up on-chain bandwidth. Using a payment channel network, millions of transactions can be generated with no high transaction fees.

That’s the Lightning Network. And, now you know how to explain it to your friends. Or if you’re feeling lazy, simply send them to this article.

This is the Lightning Network, and now you know how to explain it to your friends. If it bothers you, just forward this article to them.


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