On 14th September, the first day of the Litecoin Summit took place in San Fransisco wherein several significant figures in the cryptocurrency space made their presence felt. Elizabeth Stark, the brain behind Lightning Labs also delivered a talk at the summit where she spoke about how the technology behind the Lightning Network works.
She started by stating that the issue of scalability was first realized when Satoshi Nakamoto released the Bitcoin P2P e-cash paper. Here, an individual pointed out that while the idea is concrete, the transactions will not scale. Post this, a proposal drafted by two members of the Bitcoin community arrived, which was titled ‘The Bitcoin Lightning Network: Scalable Off-chain Instant Payments’.
Next, Stark explained that the basic concept of Lightning was to create a series of contracts on top of Bitcoin as a second-layer solution, using a technology called Payment Channels. She further said that the network uses another technology called Hash Timeclock Contract, wherein all the intermediate nodes can only receive the funds if and only if they have forded it onward. Therefore, either the transaction reaches completion or goes back to the sender. This eliminates the risk of cybercrime, such as theft.
Regarding the elimination of counterparty risk, Stark stated that it is not possible in the case of Lightning as a third party cannot steal funds due to the contracts enforced on the blockchain. One of the main goals of this technology is to create a peer-to-peer network where the concept of a trusted financial intermediary is removed. In her words:
“Effectively it’s a global, decentralized judge that cannot be bribed. If you think of lightning transactions as contracts, not all contracts go to court. Maybe you sign one with your job or your lease, typically you’re not going to court. In the case that it does, the blockchain enforces it.”
She also spoke about the cross-chain transactions that the Lightning Network enabled for Litecoin and Bitcoin users. Here, two parties who have different cryptocurrencies [either LTC or BTC] can send and receive funds instantly on the network.
Alec Mac, a Twitter user who is also a cryptocurrency specialist and Bitcoin maximalist commented on Stark’s talk. He wrote:
“Elizabeth you’re a true hero to a cryptocurrency community. Thank you. Your talks are easy to understand and a great help for the push of (right) information. Are you on IRC (freenode)?”
Another blockchain follower and enthusiast, Quan inquired:
“So is Lightning more used as a prepayment / payment system. And could software on top of that layer be used as a post-payment system?”
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