Quote from: Carlton Banks on January 17, 2018, 11:26:34 AM

Quote from: Wind_FURY on January 16, 2018, 04:37:29 AM

Quote from: Carlton Banks on January 15, 2018, 12:54:52 PM

Anyone can open a Lightning channel with anyone else, and anyone can also open as many channels as they like. But I guess you're going to call anyone with more than 1 channel a bank Roll Eyes

Carton, would it be fair to say that the Lightning Network would function like Ripple but with a few differences like, Lightning channels are backed by real Bitcoins while a Ripple "trust" channel is backed by nothing but an IOU?

First things first: I do a little study of Lightning, but wouldn't be considered any kind of expert on the subject. I certainly don't know anything about today's Ripple, which has no doubt changed since I first checked Ripple out (many years ago).

But your assertion that Lightning channels are backed by real BTC is correct. Lightning takes advantage of a protocol designed to make it safe to use un-broadcasted Bitcoin transactions as they guarantee ownership of the funds in those un-broadcasted transactions, if the transaction is broadcasted on-chain (which is what closing a channel entails).

Maybe an analogy for this would be the various payment processors that exist in the internet age: Square, PayPal, Moneygram etc. PayPal, for instance, has just one regular bank account to which all PayPal customers send money. PayPal then has a separate accounts system that tells them who owns what amount of the balance in that one bank account, so people with PayPal membership can send each other money without ACH or SWIFT or any other mainstream system.

With Lightning, you can open your own decentralised Bitcoin payment processor (a channel) that lets you forge the Bitcoin transactions you would have use on-chain, but just without sending them, in the full knowledge that you can send them should you wish to send that money on-chain instead. So it's like letting everyone open up a private payments processor for Bitcoin, but with the difference being that there's a protocol for all the individual payment processors to send BTC between each other, i.e. Square can send to Moneygram using the same system. And you are your own independent peer-to-peer Square or PayPal, you are still your own bank in the same way you are when using the blockchain, no one has different rights or abilities than anyone else on Lightning.

From what I remember about Ripple, you don't own anything. Banking corporations control the Ripple payment gateways, and can accept or deny your transactions for any reason they choose. So it's not peer-to-peer at all (despite being endorsed by the so-called p2p foundation), because there are privileged nodes on the network that can dictate what you can and can't do, no different to the regular banking system.

But in Ripple, the last time I tried it some years ago, the Bitcoin you own is deposited in a gateway and that is what "backs up" the amount you have in your Ripple wallet. In the wallet, you old Bitcoin in the form of something called "gateway.BTC.IOU" with the "trust channel" amount allowed only up to what you have in that gateway.

This is the interesting part, you can also open a "trust channel" to another gateway allowing you to send your gateway1.BTC.IOUs to gateway2.BTC.IOUs, and the clearing goes through Ripple's orderbook.

In a way, Lightning and Ripple are the same, but without the 3rd party trust on the gateways included.