Mastering the Lightning Network.

Format:

Book

Author/Creator:

Antonopoulos, Andreas M.

Contributor:

Osuntokun, Olaoluwa.

Pickhardt, René.

Language:

English

Subjects (All):

Blockchains (Databases).

Electronic funds transfers.

Bitcoin.

Physical Description:

1 online resource (466 pages)

Edition:

1st ed.

Place of Publication:

Sebastopol : O'Reilly Media, Incorporated, 2021.

Summary:

The Lightning Network (LN) is a rapidly growing second-layer payment protocol that works on top of Bitcoin to provide near-instantaneous transactions between two parties. With this practical guide, authors Andreas M. Antonopoulos, Olaoluwa Osuntokun, and Rene Pickhardt explain how this advancement will enable the next level of scale for Bitcoin, increasing speed and privacy while reducing fees. Ideal for developers, systems architects, investors, and entrepreneurs looking to gain a better understanding of LN, this book demonstrates why experts consider LN a critical solution to Bitcoin's scalability problem. You'll learn how LN has the potential to support far more transactions than today's financial networks. This book examines: How the Lightning Network addresses the challenge of blockchain scaling The Basis of Lightning Technology (BOLT) standards documents The five layers of the Lightning Network Protocol Suite LN basics, including wallets, nodes, and how to operate one Lightning payment channels, onion routing, and gossip protocol Finding paths across payment channels to transport Bitcoin off-chain from sender to recipient.

Contents:

Intro

Copyright

Table of Contents

Preface

Intended Audience

Conventions Used in This Book

Code Examples

Using Code Examples

References to Companies and Products

Addresses and Transactions in This Book

O'Reilly Online Learning

How to Contact Us

Contacting Andreas

Contacting René

Contacting Olaoluwa Osuntokun

Acknowledgments by Andreas

Acknowledgments by René

Acknowledgments by Olaoluwa Osuntokun

Contributions

Sources

Part I. Understanding the Lightning Network

Chapter 1. Introduction

Lightning Network Basic Concepts

Trust in Decentralized Networks

Fairness Without Central Authority

Trusted Protocols Without Intermediaries

A Fairness Protocol in Action

Security Primitives as Building Blocks

Example of the Fairness Protocol

Motivation for the Lightning Network

Scaling Blockchains

The Lightning Network's Defining Features

Lightning Network Use Cases, Users, and Their Stories

Conclusion

Chapter 2. Getting Started

Alice's First Lightning Wallet

Lightning Nodes

Lightning Explorers

Lightning Wallets

Testnet Bitcoin

Balancing Complexity and Control

Downloading and Installing a Lightning Wallet

Creating a New Wallet

Responsibility with Key Custody

Mnemonic Words

Storing the Mnemonic Safely

Loading Bitcoin onto the Wallet

Acquiring Bitcoin

Receiving Bitcoin

From Bitcoin to Lightning Network

Lightning Network Channels

Opening a Lightning Channel

Buying a Cup of Coffee Using the Lightning Network

Bob's Cafe

A Lightning Invoice

Chapter 3. How the Lightning Network Works

What Is a Payment Channel?

Payment Channel Basics

Routing Payments Across Channels

Payment Channels

Multisignature Address

Funding Transaction

Commitment Transaction

Cheating with Prior State.

Announcing the Channel

Closing the Channel

Invoices

Payment Hash and Preimage

Additional Metadata

Delivering the Payment

The Peer-to-Peer Gossip Protocol

Pathfinding and Routing

Source-Based Pathfinding

Onion Routing

Payment Forwarding Algorithm

Peer-to-Peer Communication Encryption

Thoughts About Trust

Comparison with Bitcoin

Addresses Versus Invoices, Transactions Versus Payments

Selecting Outputs Versus Finding a Path

Change Outputs on Bitcoin Versus No Change on Lightning

Mining Fees Versus Routing Fees

Varying Fees Depending on Traffic Versus Announced Fees

Public Bitcoin Transactions Versus Private Lightning Payments

Waiting for Confirmations Versus Instant Settlement

Sending Arbitrary Amounts Versus Capacity Restrictions

Incentives for Large Value Payment Versus Small Value Payments

Using the Blockchain as a Ledger Versus as a Court System

Offline Versus Online, Asynchronous Versus Synchronous

Satoshis Versus Millisatoshis

Commonality of Bitcoin and Lightning

Monetary Unit

Irreversibility and Finality of Payments

Trust and Counterparty Risk

Permissionless Operation

Open Source and Open System

Chapter 4. Lightning Node Software

Lightning Development Environment

Using the Command Line

Downloading the Book Repository

Docker Containers

Bitcoin Core and Regtest

Building the Bitcoin Core Container

The c-lightning Lightning Node Project

Building c-lightning as a Docker Container

Setting Up a Docker Network

Running the bitcoind and c-lightning Containers

Installing c-lightning from Source Code

Installing Prerequisite Libraries and Packages

Copying the c-lightning Source Code

Compiling the c-lightning Source Code

The Lightning Network Daemon Node Project

The LND Docker Container.

Running the bitcoind and LND Containers

Installing LND from Source Code

Copying the LND Source Code

Compiling the LND Source Code

The Eclair Lightning Node Project

The Eclair Docker Container

Running the bitcoind and Eclair Containers

Installing Eclair from Source Code

Copying the Eclair Source Code

Compiling the Eclair Source Code

Building a Complete Network of Diverse Lightning Nodes

Using docker-compose to Orchestrate Docker Containers

docker-compose Configuration

Starting the Example Lightning Network

Opening Channels and Routing a Payment

Chapter 5. Operating a Lightning Network Node

Choosing Your Platform

Why Is Reliability Important for Running a Lightning Node?

Types of Hardware Lightning Nodes

Running in the "Cloud"

Running a Node at Home

What Hardware Is Required to Run a Lightning Node?

Switching Server Configuration in the Cloud

Using an Installer or Helper

RaspiBlitz

Mynode

Umbrel

BTCPay Server

Bitcoin Node or Lightweight Lightning

Operating System Choice

Choose Your Lightning Node Implementation

Installing a Bitcoin or Lightning Node

Background Services

Process Isolation

Node Startup

Node Configuration

Network Configuration

Security of Your Node

Operating System Security

Node Access

Node and Channel Backups

Hot Wallet Risk

Sweeping Funds

Lightning Node Uptime and Availability

Tolerate Faults and Automate

Monitoring Node Availability

Watchtowers

Channel Management

Opening Outbound Channels

Getting Inbound Liquidity

Closing Channels

Rebalancing Channels

Routing Fees

Node Management

Ride The Lightning

lndmon

ThunderHub

Part II. The Lightning Network in Detail

Chapter 6. Lightning Network Architecture

The Lightning Network Protocol Suite.

Lightning in Detail

Chapter 7. Payment Channels

A Different Way of Using the Bitcoin System

Bitcoin Ownership and Control

Diversity of (Independent) Ownership and Multisig

Joint Ownership Without Independent Control

Preventing "Locked" and Un-Spendable Bitcoin

Constructing a Payment Channel

Node Private and Public Keys

Node Network Address

Node Identifiers

Connecting Nodes as Direct Peers

Constructing the Channel

Peer Protocol for Channel Management

Channel Establishment Message Flow

The Funding Transaction

Generating a Multisignature Address

Constructing the Funding Transaction

Holding Signed Transactions Without Broadcasting

Refund Before Funding

Constructing the Presigned Refund Transaction

Chaining Transactions Without Broadcasting

Solving Malleability (Segregated Witness)

Broadcasting the Funding Transaction

Sending Payments Across the Channel

Splitting the Balance

Competing Commitments

Cheating with Old Commitment Transactions

Revoking Old Commitment Transactions

Asymmetric Commitment Transactions

Delayed (Timelocked) Spending to_self

Revocation Keys

The Commitment Transaction

Advancing the Channel State

The commitment_signed Message

The revoke_and_ack Message

Revoking and Recommitting

Cheating and Penalty in Practice

The Channel Reserve: Ensuring Skin in the Game

Closing the Channel (Cooperative Close)

The Shutdown Message

The closing_signed Message

The Cooperative Close Transaction

Chapter 8. Routing on a Network of Payment Channels

Routing a Payment

Routing Versus Pathfinding

Creating a Network of Payment Channels

A Physical Example of "Routing"

Fairness Protocol

Implementing Atomic Trustless Multihop Payments

Revisiting the Tipping Example.

On-Chain Versus Off-Chain Settlement of HTLCs

Hash Time-Locked Contracts

HTLCs in Bitcoin Script

Payment Preimage and Hash Verification

Extending HTLCs from Alice to Dina

Back-Propagating the Secret

Signature Binding: Preventing Theft of HTLCs

Hash Optimization

HTLC Cooperative and Timeout Failure

Decrementing Timelocks

Chapter 9. Channel Operation and Payment Forwarding

Local (Single Channel) Versus Routed (Multiple Channels)

Forwarding Payments and Updating Commitments with HTLCs

HTLC and Commitment Message Flow

Forwarding Payments with HTLCs

Adding an HTLC

The update_add_HTLC Message

HTLC in Commitment Transactions

New Commitment with HTLC Output

Alice Commits

Bob Acknowledges New Commitment and Revokes Old One

Bob Commits

Multiple HTLCs

HTLC Fulfillment

HTLC Propagation

Dina Fulfills the HTLC with Chan

Bob Settles the HTLC with Alice

Removing an HTLC Due to Error or Expiry

Making a Local Payment

Chapter 10. Onion Routing

A Physical Example Illustrating Onion Routing

Selecting a Path

Building the Layers

Peeling the Layers

Introduction to Onion Routing of HTLCs

Alice Selects the Path

Alice Constructs the Payloads

Key Generation

Wrapping the Onion Layers

Fixed-Length Onions

Wrapping the Onion (Outlined)

Wrapping Dina's Hop Payload

Wrapping Chan's Hop Payload

Wrapping Bob's Hop Payload

The Final Onion Packet

Sending the Onion

The update_add_htlc Message

Alice Sends the Onion to Bob

Bob Checks the Onion

Bob Generates Filler

Bob De-Obfuscates His Hop Payload

Bob Extracts the Outer HMAC for the Next Hop

Bob Removes His Payload and Left-Shifts the Onion

Bob Constructs the New Onion Packet

Bob Verifies the HTLC Details

Bob Sends the update_add_htlc to Chan.

Chan Forwards the Onion.

Notes:

Description based on publisher supplied metadata and other sources.

ISBN:

9781492054818

149205481X

9781492054832

1492054836

9781492054856

1492054852

OCLC:

1289816509