The bitcoin lightning network is an off-chain payment channel that has the potential to provide instant, high-volume micropayments while removing the risk of delegating custody of funds to trusted third parties. Recently, we had the chance to ask one of the inventors, Joseph Poon, a few questions surrounding this new technology and how they are planning to use the lightning network to benefit bitcoin users.

Travis: Along with Tadge Dryja, you’ve been leading the charge on one of the possible implementations which scales bitcoin sustainably. Can you tell us how you first devised the proposal for the lightning network and some of the challenges you currently face in creating a working prototype?

Joseph: A lot of the lightning network was designed in 2013, but I didn’t do anything about it because I assumed there wasn’t much interest in this kind of stuff. I then met Tadge at the SF Bitcoin Social and SF Bitcoin Devs meetup groups. We discussed this stuff and he came up with some further optimizations to the protocol. A lot of the original thinking was about making a kind of correspondent banking system without custodial trust.

The current challenges are related to getting in the soft-forks necessary to make it successful. There are several soft-forks necessary in the near-term and some longer-term. OP_CHECKLOCKTIMEVERIFY has been merged into bitcoin-core, which means that it will be in bitcoin within several months, which can be used by Lightning (among other projects which need it). OP_CHECKSEQUENCEVERIFY and a relative locktime nSequence soft-fork are also necessary to let one create channels which can last an indefinite amount of time. Longer-term it’s ideal for wallet security to have a SIGHASH_NORMALIZED or SIGHASH_NOINPUT flag which allows one to sign transactions which have not been created yet, this allows for one to outsource the security of watching the blockchain. Additionally, it may be necessary longer-term to have a timestop function for blockchain denial service attacks. Until that time, the Lightning Network should be used primarily for micropayments and smaller amounts to minimzie risk.

Travis: If only a small subset of transactions are broadcast to the main blockchain, how can the lightning network help to facilitate private transactions? Do you see off-chain transactions absorbing a large portion of the current demand on computation?

Joseph: The Lightning Network can account for a large portion of the current demand for computation, however it has the opportunity to do much more as well. I like to say that the entire world doesn’t need to know about (nor should they have to compute on) the fact that you bought a cup of coffee using bitcoin. That stuff should be computed off-chain in a secure way. However, much like how bitcoin offers significant efficiency gains by having programmatic financial computation, the Lightning Network can similarly offer significant gains on micropayments.

Travis: How many intermediary payment channels do you see as ideal in the lightning network?

Joseph: Honestly, I don’t know what will happen, but we’re aiming to make the network as decentralized as possible. Decentralization means minimizing the network effect benefits from highly connected nodes, making route discovery easy, and minimizing systemic trust. Under that view, supporting more intermediaries are better. However, the history of decentralized networks don’t have centralized trusted named hubs, but have an optimal case with high-capacity supernodes which are interchangeable (no reputation, many supernodes, and many routes). So I would say somewhere between 2-5 intermediates would be an end-state, but that’s just a estimate. At this time, I think it’s a good idea to experiment with various models and designs as much as possible to emphasize designs, as the challenges are not making a functional implementation, but ways to maximize decentralization.

Travis: With the lightning network inheriting the opcodes of the main bitcoin network, what is preventing the smart contracting capabilities of arbitrage, micropayments, and time-bound contracts that your proposal promises from being implemented today?

Joseph: Lightning Network is one of the earliest implementations of what Tadge and I like to call, “Adversarial Multisig”. In other words, multisig where the other guy shouldn’t be trusted and might try to rip you off. A lot of the fun financial contracts are adversarial in nature (some legal theorists would not define it as a contract if it wasn’t adversarial). Enabling “Adversarial Multisig” as part of the requirement for enabling Lightning Network means that it’s possible you’ll start seeing a lot of fun Bitcoin smart contracts popping up soon after.

Right now, “Adversarial Multisig” is broken because 2-of-2 multisig can be locked up to hostage scenarios due to malleability. If we can get in some kind of SIGHASH_NORMALIZED or SIGHASH_NOINPUT flag, you may start seeing some really interesting applications in Bitcoin.

Travis: You talk at length about how the lightning network would reposition transactions as circuits instead of packets. Can you explain to us what some of the implications of this would be?

Joseph: The implications are that the view of Bitcoin can change. Costs are dramatically different, once channels are established, it means that you can do an incredibly high volume of transactions, the costs are all front-loaded to blockchain transaction fees. This results in a somewhat different view of blockchain transactions not as payments, but routes.

As a result, you’ll have very low fees and a new way to do high-volume financial transactions.

Travis: How do you think we will be using bitcoin in 10 years?

Joseph: I’m not sure what the future will hold, but I think there’s lots of people working tackling the challenges. I think there’s lots of promise for technological development of Bitcoin as the core basis for money. Bitcoin created the basis for money, and by having an electronic cash system, we need to build the rest of the financial infrastructure as a result. However, by having this monetary base, technologies like Lightning Network can rest atop this base and build out the future of finance.

Author

Travis Patron

Travis Patron is the author of The Bitcoin Revolution: An Internet of Money, a seminal publication in the digital money space which outlines the basics of the bitcoin payment system. As a public speaking authority, he regularly speaks to audiences on the economics & industry trends of bitcoin.

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