-1 upvotes, 3 direct replies (showing 3)
[deleted]
Comment by [deleted] at 22/12/2017 at 05:50 UTC
2 upvotes, 1 direct replies
The way I understand it, coupled with segwit, it is an IOU that either party can resolve on demand. In fact I don't know if an IOU is the best analogy since with an IOU, the person can just disappear or decide to not pay. LN is more like a signed and notarized contractual agreement with the house put up as collateral.
Comment by killerstorm at 22/12/2017 at 06:55 UTC
2 upvotes, 1 direct replies
They are simply IOUs.
No, they aren't. They are unconfirmed transactions.
The difference between Lightning transactions and normal unconfirmed transaction is that Lightning transactions happen within a contract which makes it impossible for one of parties to cancel or double-spend them.
Accepting unconfirmed transaction is risky because network knows nothing about your arrangement with sender, and he can cancel payment through double-spending at any time.
But when you do Lightning, you first get the contract confirmed on-chain. Now the blockchain knows what you and your counterparty agreed to, and it won't allow your counterparty to cheat.
So this has nothing to do with IOU, LN transactions are simply transactions with delayed confirmation and updateability.
IOUs depend on trust, LN transactions do not. IOUs aren't guaranteed to be repaid, LN transactions are certain.
Comment by killerstorm at 22/12/2017 at 07:48 UTC
2 upvotes, 0 direct replies
BTW updateable transactions was actually Satoshi's idea. He implemented update mechanism (e.g. nSequence field in inputs), but he didn't know how to enforce update sequencing on-chain. Instead he thought that if there are many nodes, a random nodes will be honest.
Dryja and Poon found a way to enforce update logic on-chain. So now updateable transactions can actually work reliably, and we can execute Satoshi's vision.