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What happens when you make make lightning transactions that are less than the Bitcoin fee to validate them? Is there a lower limit for transactions to actually get processed? If I make a transaction with 1 satoshi, what happens?
Breez wallet does offer a function like that:
No. An onchain transaction is still required to create a lightning channel. This won't change. As far as I know there are no ways I know of to get around that without substantially compromising your security (eg you could give someone the keys to an existing channel, but then you have to trust that they didn't keep a copy of the channel's seed). However, that's not to say that you necessarily have to pay for that channel. Breez opens a channel for you without requiring payment. You still have to wait for the channel to open, but its pretty convenient.
I thought I read something about channel factories allowing this. If you have to open a channel to onboard mass amounts of people, it just isn't going to happen. Bitcoin can only process about 200 million transactions a year.
With channel factories, you still need an on chain transaction to join the factory. You're right that this reduces the number of on chain transactions tho, since many people can join the factory in a single transaction. If 10 people joined a factory at a time, the time to bring 8 billion people onto the lightning network at 200 million tx/yr would go down from 40 years to 4 years.
>What is the advantage of having an exchange use LN?
An exchange can process withdrawals via LN without spending so much on transaction fees, meaning they can pass the savings on to their customers. And customers can withdraw their bitcoins from the exchange directly into their Lightning wallets, meaning they don't need to pay for on-chain transactions to reload their Lightning balances. Ultimately, the entire cycle, from consumer's fiat to consumer's bitcoin to merchant's bitcoin to merchant's fiat, can proceed with no on-chain transactions, and that's a huge win for usability.
The main idea is the following:
You can always trust a 0-conf transaction you sign yourself, so you never really need to write them in the blockchain at the first place. Lightning is the exploitation at its best of this idea.
Lightning is a network so that each "edge" (called channel) is a Bitcoin address (in fact UTXO) control by each node of the edges. They negociate with each other to share the bitcoins in this address by signing together valid transactions that can be broadcasted to the Bitcoin network. But they don't broadcast it, because these transactions are smart contract with the ability to expire when peers decide to share the coins differently. So they can pay each other by just signing and exchanging a transaction spending the coins in the channel differently and make the previous expire so that only the last one is not, each node verify for himself the transaction it signs.
To get back the bitcoins on the blockchain, anyone can broadcast this final transaction unilateraly. If the transaction was expired (cheating), the other peer can use the underlying smart contract to steal all the coins before the cheater can spend them.
And finally, Lightning includes a communication protocol so that you can pay someone without having a channel with him. The idea is to find a path in the Lightning network and use the intermediary nodes to pay him by routing the payment.
Bitcoin is a peer-to-peer system for electronic cash, Lightning is a form of peer-to-peer electronic cash.
I'll simplify a bit:
With Lightning, you open a channel with someone, which is like putting some bitcoins from both parties in a safe. This happens on-chain.
Then they can exchange transactions off chain. Basically saying that one of them paid the other one. This can happen many times per second and it's basically free.
But the key is that those off chain transactions are actually signed bitcoin transactions. So when the channel closes (upon agreements or forcefully), the users can publish the last transaction, and that's what will be published and secured by the blockchain.
Now, if someone publishes an old transaction, it's considered malicious. If the other party presents a newer transaction signed by both, the malicious party is punished, and I believe, loses all the coins.
It has a lot of nuances and problems that had to be solved. But that's the gist of it.
I'm not an expert but I hope I helped.
It means you can avoid the main blockchain, which means you can avoid the need to wait 10,60,whatever minutes before you decide whether your transaction is confirmed, and you also can avoid the higher fees that you will need to pay.
Usually LN will be used to make smaller payments to stores. So suppose a merchant requires BTC payment. Now you can buy BTC on the exchange, withdraw from the exchange directly into your LN channel, and then make an instant LN payment to your merchant.
No, you can open a channel any size you want since you're just instructing software to broadcast a transaction. You can get around the safety limits that are active by default. [Here](https://1ml.com/channel/694560395843665921) is a channel with 2.68BTC capacity.
old limit was 0.168 BTC but looks like option_support_large_channel for wumbo was merged on march 2nd
But I dont know if any wallets are supporting this yet but looks likely soon.
Regardless the past limit is still much more than many will be withdrawing from an exchange being 1,588 USD worth
Hi u/Atlas_84, thanks for tipping u/bitusher **10000** satoshis!
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Dunno, you tell me