The Bitcoin Lightning Network
http://lightning.network
The Lightning Network is a decentralized system for
instant, high-volume micropayments that removes therisk of delegating custody of funds to trusted
third parties.
Bitcoin, the world's most widely used and valuable
digital currency, allows anyone to send value without atrusted intermediary or depository. Bitcoin contains anadvanced scripting system allowing users to program
instructions for funds. There are, however, somedrawbacks to bitcoin's decentralized design.
Transactions confirmed on the bitcoin blockchain takeup to one hour before they are irrevesible.
Micropayments, or payments less than a few cents, areinconsistently confirmed, and fees render suchtransactions unviable on the network today.

AliceBobThe Lightning Network solves these problems. It is one of the first implementations of a multi-party Smart Contract(programmable money) using bitcoin's built-in scripting. The Lightning Network is leading technological development in
multiparty financial computations with bitcoin.

Instant Payments. Bitcoin aggregates transactions into blocks spaced ten minutes apart. Payments are widely
regarded as secure on bitcoin after confirmation of six blocks, or about one hour. On the Lightning Network, payments
don't need block confirmations, and are instant and atomic. Lightning can be used at retail point-of-sale terminals, withuser device-to-device transactions, or anywhere instant payments are needed.

Micropayments. New markets can be opened with the possibility of micropayments. Lightning enables one to send
funds down to 0.00000001 bitcoin without custodial risk. The bitcoin blockchain currently enforces a minimum output
size many hundreds of times higher, and a fixed per-transaction fee which makes micropayments impractical. Lightning
allows minimal payments denominated in bitcoin, using actual bitcoin transactions.

Scalability. The bitcoin network will need to support orders of magnitude higher transaction volume to meet demand
from automated payments. The coming increase in internet-connected devices needs a platform formachine-to-machine payments and automated micropayment services. Lightning Network transactions are conducted
off the blockchain without delegation of trust and ownership, allowing users to conduct nearly unlimited transactions
between other devices.
How it Works. Funds are placed into a two-party, multisignature "channel" bitcoin address. This channel isrepresented as an entry on the bitcoin public ledger. In order to spend funds from the channel, both parties must agree
on the new balance. The current balance is stored as the most recent transaction signed by both parties, spending
from the channel address. To make a payment, both parties sign a new exit transaction spending from the channeladdress. All old exit transactions are invalidated by doing so.
The Lightning Network does not require cooperation from the counterparty to exit the channel. Both parties have theoption to unilaterally close the channel, ending their relationship. Since all parties have multiple multisignaturechannels with many different users on this network, one can send a payment to any other party across this network.
By embedding the payment conditional upon knowledge of a secure cryptographic hash, payments can be madeacross a network of channels without the need for any party to have unilateral custodial ownership of funds. The
Lightning Network enables what was previously not possible with trusted financial systems vulnerable tomonopolies—without the need for custodial trust and ownership, participation on the network can be dynamic andopen for all.