For a good overview, please see the Lightning Network whitepaper (PDF).

The security of Lightning relies on the property that in the event of any disagreement between transacting parties, either party can slam the payment channel closed by committing its current state to the blockchain.  The blockchain has the final word; parties always have instantly available recourse to the blockchain; thus, the system is trustlessness.  While the channel is open, it allows the parties to cooperatively keep a private ledger of their own transactions with each other (including transactions being routed on another party’s behalf, from another channel).

Imagine that you and I kept a pen-and-paper accounting ledger of our Bitcoin-denominated transactions with each other—but the ledger has the magic property that after every mutually agreed update thereof, each of us has the right bits to claim our coins on the blockchain.  That’s Lightning, in a nutshell.


I hate to break it to you, but the vast majority of ostensible humans are actually mewling ovine anthropoids who couldn’t care less about freedom, privacy, security, self-empowerment, or “being your own bank”.  Their very noblest aspiration is to be kept warm, well-fed, and above all, entertained.  N.b. use of the passive, to be kept.

To illustrate, I distill here the essence of a conversation I once had with a person of far above-average intelligence—actually, a man with a science Ph.D.:

“Bitcoin gives you ultimate power over yourself, and ultimate responsibility for yourself.  Of course, these two principles are inseparable.  You need no one’s permission to use the system.  Nobody can freeze or seize your coins.  If you mess up and lose your private keys, there is no higher authority with an override switch.”

(I pause, awaiting the response of being impressed.)

“So if I lose it, it’s gone?”

“Yes.  Bitcoin has no mercy.  It is for smart, responsible people.  But care of your coins is not rocket science; you can keep yourself safe with a userfriendly hardware wallet, plus a paper backup of your seed phrase locked in a safe and written into your last will and testament.”

“If I lose it, it’s just gone forever?  I don’t like that.”

(Crickets chirping.)

Out of respect for the sacred memory of our prophet Satoshi Nakamoto, I did not mention Coinbase.


As a matter of my own original thinking (not anything I read anywhere), I myself have taken to thinking in terms of a Bitcoin ecosystem:

• Bitcoin, the Satoshi network, is the foundation.
• Bitcoin, the abstract currency unit, is created ex nihilo from within that foundation, secured by it, and ultimately controlled by it.
• Bitcoin, the abstract currency unit, can/will also power what I think of as “Bitcoin applications” on additional layers which build up and outward from the foundation horizontally (sidechains) and vertically (Lightning).

Distinguishing these concepts helps think clearly about the matter.  That was off-the-cuff; I should try to draw up a more formalized, more rigorous taxonomy. /* XXX TODO */


There is a common misconception that miners provide the security of the network.

Miners have only and exactly one job:  To determine the ordering of transactions in a Byzantine fault-tolerant manner, which in turn solves the double-spend problem.  That is a very important job, and also quite resource-intensive; that is why miners get paid for it.  Nevertheless, it is only one component in a machine with many moving parts.

You may often hear that “miners validate transactions”.  This is a trivial half-truth:  Of course, miners must independently validate transactions so as to reliably produce valid blocks.  But miners are not the power responsible for enforcing the validity of transactions across the network.  Full nodes do that.

Each and every full node is responsible for validation:  Validation of transactions, and also validation of consensus rules.  A node’s owner gains additional individual security from independently validating the blockchain; and the network as a whole gains the security of all nodes independently validating the blockchain.  Observe how here as everywhere else, Bitcoin aligns the individual’s selfish interest with the common interest.  A node owner protects the whole network by protecting his own security, first and foremost.

The power of nodes is the reason why many ignorantly-proposed attacks by miners simply would not work.  For example, a persistent mendacious bit of FUD against Segwit is the allegation that miners could steal all the funds from Segwit transactions.  Well, I guess they could try, by creating a block which says “pay me all the money”.  For that matter, a miner could create a block which pays himself 21 million (or 21 billion) bitcoins ex nihilo.  Likewise, a miner could also mine a block filled with gibberish from /dev/random; and any miner could produce a block 8MB or 1GB in size.  But these blocks would be invalid, and would thus be rejected by all full nodes.  To nodes, it would be as if such blocks do not exist; as far as Bitcoin is concerned, they don’t.  Miners who tried such nonsense “attacks” would only be throwing away their hashpower (plus probably getting their IP addresses widely blacklisted).

Contra popular superstition, full nodes do not follow “the longest chain”.  They follow the valid chain with the highest total POW.

SPV clients do almost blindly follow “the longest chain”, which is why they are vulnerable to being misled onto forkchains (among other nasty attacks).

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On-chain transactions are most analogous to physical exchange of bullion (coins and bars), not jewellery.  Yes, off-chain transactions are more like gold notes—but magical, trustless notes, as I said!

There is no such thing as “clone scaling”.  That’s more akin to eschewing gold, and using silver instead.  Or in this case, brass.  I would rather keep and trade my wealth in car wash tokens than in so-called “clones”; at least, I could get my car clean that way.

Anybody advocating forks, or this “clone” euphemism therefor, is in need of a dire warning:


I emphasize this, for good reason.  I seem to be throwing around that link several times per day, of late.  Bitcoin derives its monetary value from social factors, which are enabled but not created by its technical infrastructure.  The social part requires that there can be only one Bitcoin, unique and undiluted.

This notion of so-called “clone scaling” is absolutely wrong from a social and monetary perspective; but from a technical perspective, it’s one of those ideas which is “not right, and not even wrong”.  It does not make sense at all.  That is why I seem to have ignored it above.