Understanding a Lightning Network, Part 1: Building a Bidirectional Bitcoin Payment Channel

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The Lightning Network is substantially a many rarely expected technological creation to be deployed on tip of Bitcoin. The remuneration layer, initial due by Joseph Poon and Tadge Dryja about a year ago, promises to support a probably total array of off-chain exchange among users, during scarcely no cost – while leveraging a confidence offering by Bitcoin.

At slightest 3 companies – Poon and Dryja’s LightningBlockstream and Blockchain – are now operative on implementations of a technology. But few outward this tiny technological frontline entirely grasp how a “future of micropayments” is set to boost Bitcoin’s capabilities.

In this three-part series, Bitcoin Magazine lays out a simple building blocks of a Lightning Network, and shows how they fit together to comprehend this arriving custom layer.

This initial partial of a array establishes a required building blocks, and shows how these can be total to emanate “smart contracts,” that can be practical to comprehend a initial requirement of a Lightning Network: a bidirectional remuneration channel.

(Note: Anyone with a plain bargain of Bitcoin can skip a building blocks.)

Building Block #1: Unconfirmed Transactions

At a heart, a Bitcoin custom consists of transactions, that are typically related to prior transactions, and potentially to destiny transactions. Each transaction contains inputs, that refer

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