How is Lightning trustless?

[GoSeigen]

My elderly mother wants to send me money abroad. She has been told about an app which lets her make a lightning transaction which will be almost instantaneous and with a very reasonable fee. Of course she worries about the security of this transaction going abroad but she has been assured that lightning transaction itself is trustless -- the original USP of bitcoin of course -- so she can be sure the transaction will proceed without fraud or loss.


Here's my challenge: can someone explain simply enough for her to understand, in three brief paragraphs and with minimal jargon, exactly why lightning transactions are trustless in the same way that bitcoin transactions are. [Assume that she is reasonably intelligent and well-read and understands in a basic way what makes bitcoin trustless.]

Alternatively, feel free to explain why lightning is NOT trustless if you can do so as clearly and succinctly.


Good luck.


GS
EDIT: Please, no bald assertions. The explanation should be logical and convincing.

[NotSure]

How is Lightning trustless?

No-one trusts it?

EDIT: Please, no bald assertions. The explanation should be logical and convincing.

My apologies.....

[NotSure]

I think for Lightning, "trustless" just seems to mean peer-to-peer - no requirement for a trusted third party.

...Trust in Decentralized Networks
You will often hear people calling Bitcoin and the Lightning Network “trustless.” At first glance this is confusing. After all, isn’t trust a good thing? Banks even use it in their names! Isn’t a “trustless” system, a system devoid of trust, a bad thing?

The use of the word “trustless” is intended to convey the ability to operate without needing trust in the other participants in the system. In a decentralized system like Bitcoin, you can always choose to transact with someone you trust. However, the system ensures you can’t be cheated even if you can’t trust the other party in a transaction. Trust is a nice-to-have instead of a must-have property of the system.

Contrast that to traditional systems like banking where you must place your trust in a third party, since it controls your money. If the bank violates your trust, you may be able to find some recourse from a regulator or court, but at an enormous cost of time, money, and effort.

Trustless does not mean devoid of trust. It means that trust is not a necessary prerequisite to all transactions and that you can transact even with people you don’t trust because the system prevents cheating.

Before we get into how the Lightning Network works, it’s important to understand one basic concept that underlies Bitcoin, the Lightning Network, and many other such systems: something we call a fairness protocol. A fairness protocol is a way to achieve fair outcomes between participants, who do not need to trust each other, without the need for a central authority, and it is the backbone of decentralized systems like Bitcoin....

https://www.oreilly.com/library/view/mastering-the-lightning/9781492054856/ch01.html

[GoSeigen]

I think for Lightning, "trustless" just seems to mean peer-to-peer - no requirement for a trusted third party.

...Trust in Decentralized Networks
You will often hear people calling Bitcoin and the Lightning Network “trustless.” At first glance this is confusing. After all, isn’t trust a good thing? Banks even use it in their names! Isn’t a “trustless” system, a system devoid of trust, a bad thing?

The use of the word “trustless” is intended to convey the ability to operate without needing trust in the other participants in the system. In a decentralized system like Bitcoin, you can always choose to transact with someone you trust. However, the system ensures you can’t be cheated even if you can’t trust the other party in a transaction. Trust is a nice-to-have instead of a must-have property of the system.

Contrast that to traditional systems like banking where you must place your trust in a third party, since it controls your money. If the bank violates your trust, you may be able to find some recourse from a regulator or court, but at an enormous cost of time, money, and effort.

Trustless does not mean devoid of trust. It means that trust is not a necessary prerequisite to all transactions and that you can transact even with people you don’t trust because the system prevents cheating.

Before we get into how the Lightning Network works, it’s important to understand one basic concept that underlies Bitcoin, the Lightning Network, and many other such systems: something we call a fairness protocol. A fairness protocol is a way to achieve fair outcomes between participants, who do not need to trust each other, without the need for a central authority, and it is the backbone of decentralized systems like Bitcoin....

https://www.oreilly.com/library/view/mastering-the-lightning/9781492054856/ch01.html

Thanks NotSure.

The question was "why [are] lightning transactions are trustless in the same way that bitcoin transactions are"?

The extract, apart from being longer that three paragraphs(!), doesn't address this question, it just asserts that it is trustless and provides an explanation for the term. I'm asking how the Lightning protocol actually fulfils the requirement of a trustless transaction.


Admittedly SN's whitepaper was a lot longer than 3 paragraphs too, but we can assume that it has been read and understood.


GS

[murraypaul]

The question was "why [are] lightning transactions are trustless in the same way that bitcoin transactions are"?

The answer is no.

While it can be peer-to-peer, in a practical sense, Lighting requires you to have an 'account' with a 'bank', and the person you are transferring money to to have an 'account' with a 'bank'. You then rely on the 'banks' transferring money between themselves (using Bitcoin), and adjusting their internal ledgers correctly (not using Bitcoin).

Sounds a lot like the traditional banking system but with a crypto spin.

And no regulation.

To be peer-to-peer, you first have to have a Bitcoin transaction between the addresses, in which case for your one-off payment, why wouldn't you just send the money in that transaction?

[Urbandreamer]

I'm not sure that Lightning transactions are trustless "in the same way that bitcoin transactions are".
However they can be trustless in slightly different way.

I'm also not sure that an explanation of the lightning network would help. ONCE you have funds on the lightning network they can be exchanged in a trustless manner, but you may need to use a 3'ed party to get funds onto or off the network.

Here are some methods used to buy beer.

1) Buy some bitcoin and put it in a number of wallets.

2) Using my Muun wallet I buy the beer using lightning. The small sum goes through a on chain transaction with fees, called a submarine swap. The lightning transaction happens, incurring lightning fees. Note that I have not mentioned a lightning node.This can't claim to be trustless, but I held the bitcoin until the transaction. That said, on chain fees exist for every transaction.

3) Others may put some bitcoin on "the wallet of satoshi" using a submarine swap incurring on chain transaction fees. Buy beer multiple times paying network fees each time but only one on chain transaction fee. Cheaper, but NOT trustless. Worse this wallet is non-custodial. However it's popular because it's easy.

4) Put some bitcoin on your own lightning node. Because it's your node that transacts with another, and nodes track the ledger, it's trustless. I use the Phoenix wallet with built in node. Buy lots of beer paying network fees. Trustless and custodial, but as cheap as WoS.

For me the advantages of the lightning network is speed of transactions and reduced costs of many small transactions, not that I make that many.

What "app"is your mother talking of using GS? How are you going to spend the money? On chain transactions might be a better solution for you and your mother. You could then use a bitcoin debit card to pay in local currency.
That is unless you are somewhere where you can use lightning day to day. I.E El Salvador, Lugano in Switzerland etc.

[Urbandreamer]

The question was "why [are] lightning transactions are trustless in the same way that bitcoin transactions are"?

The answer is no.

While it can be peer-to-peer, in a practical sense, Lighting requires you to have an 'account' with a 'bank', and the person you are transferring money to to have an 'account' with a 'bank'. You then rely on the 'banks' transferring money between themselves (using Bitcoin), and adjusting their internal ledgers correctly (not using Bitcoin).

Sounds a lot like the traditional banking system but with a crypto spin.

NOT, if you run your own Lightning node (the bank in your post). As per my post, I run one on my phone. Hence have an "account" with a "bank" that I own. MY bank/node has bitcoin, rather than someone else's bank/node with which I have an account. Of course you can choose a custodial solution, and many do. As I understand from others, it's just so easy if you do go the custodial route.

Oh, for those who actually want the details of how it works.
https://lightning.network/

Ps Lightning is good when using bitcoin to buy or sell, but not as a good storage solution. I currently have 111,055 sats on my node, worth £26 today.

[GoSeigen]

The question was "why [are] lightning transactions are trustless in the same way that bitcoin transactions are"?

The answer is no.

While it can be peer-to-peer, in a practical sense, Lighting requires you to have an 'account' with a 'bank', and the person you are transferring money to to have an 'account' with a 'bank'. You then rely on the 'banks' transferring money between themselves (using Bitcoin), and adjusting their internal ledgers correctly (not using Bitcoin).

Sounds a lot like the traditional banking system but with a crypto spin.

And no regulation.

To be peer-to-peer, you first have to have a Bitcoin transaction between the addresses, in which case for your one-off payment, why wouldn't you just send the money in that transaction?

Thank you, crystal clear, though slightly hiding the technical detail. e.g. I have seen it argued that the "banks" create a trustless connection because they use smart contracts for the transfer. Care to add a quick comment on that aspect?


GS

[murraypaul]

Thank you, crystal clear, though slightly hiding the technical detail. e.g. I have seen it argued that the "banks" create a trustless connection because they use smart contracts for the transfer. Care to add a quick comment on that aspect?

Honestly, no Urbandreamer can almost certainly give a more detailed answer than I.

I looked into it enough to realise that it is has nothing to do with Bitcoin, or the original intentions of Bitcoin, and is just trying to piggy back off the name. It would function exactly the same with any other crypto as the L1.

It has the downsides of crypto, without the upsides.

If your relative currently has no Bitcoin, or interest it in, then just a normal bank transfer/western union/... is a much better option for a one-off payment.

[Urbandreamer]

If your relative currently has no Bitcoin, or interest it in, then just a normal bank transfer/western union/... is a much better option for a one-off payment.

In the case of a one-off payment, I'd second that statement.

I'm still currious about which "app" GS's mother was looking at.

Re "trustless": it isn't possible for ANY bank transaction. ALL banking is trust based. Not just the "Trustees savings bank" (TSB).
https://en.wikipedia.org/wiki/TSB_Bank_(United_Kingdom)

As has been pointed out on this thread, to be "trustless" there must be no party to the transaction that needs to be trusted. There are in fact many advantages to trust based systems, to the extent that they are actually being introduced to bitcoin.
https://fedimint.org/
You don't need to worry about loosing your money, because a group of people (Trustees) that you trust secure it.

Trust based solutions have been at the heart of international money movements since it was done by the Knights Templar.
https://bigthink.com/the-past/knights-t ... s-finance/

However either on chain bitcoin, or provided that you run your own node, lightning, can be used in a trustless manner with modern digital communication.
It "can" be cheaper, and of course it can avoid currency controls. Either would certainly be my choice to remit "money" into or out of certain countries or occupied territories.

Back I think to GS. What country is your Mother trying to remit to? Can you tell us?

[GoSeigen]

Thanks murraypaul and Urbandreamer.

I'm really trying to get a feel for the lightning aspect of this system, I confess the "app" and putative transfer of the OP were just describing a black box using different words. I've been reading a proponent of bitcoin and like murraypaul, despite the ardent advocacy, all I could draw out was that bitcoin was the trustless layer, but that lightning seems to be a convenience layer without the trustless advantage of Bitcoin but erasing some of its disadvantages.


In essence the author was describing a system (currently in use) where Bitcoin is a trustless settlement mechanism for huge, infrequent transactions, while lightning implements something not much different to the VISA/Mastercard type payment systems already in existence.

Effectively it is becoming a separate power base in competition with established monetary systems without any significant differences or advantages. If this is what people hope to achieve then good luck to them, but it is far from the picture painted by SN or early advocates (falsely IMO) of a revolutionary trustless payment means available to everyone.

While an "investor" in Bitcoin might hope that the cunning plan to take over the world succeeds, it is in fact a direct challenge to established national monetary systems and I can't see how in the long term that will be tolerated. Will governments allow huge unregulated transfers of capital to cross borders without any of the control or oversight that accompanies other currency transactions? The Bitcoin universe is maybe still small enough for Bitcoin et al to fly under the radar (just), but ISTM that it faces significant political and regulatory risks. That's apart from the normal commercial issues that the system will have to cope with (and we've seen the effects of that on numerous other cryptos....)


Getting back to the topic of the OP: would it be accurate for someone like my mother to conclude that doing a lightning transaction would not be much different to other established means of international transfer: without the benefit of bitcoin's trustlessness and without the benefit of regulatory protection but possibly "instantaneous", "cheap" and "rebellious"?



GS

[Urbandreamer]

Getting back to the topic of the OP: would it be accurate for someone like my mother to conclude that doing a lightning transaction would not be much different to other established means of international transfer: without the benefit of bitcoin's trustlessness and without the benefit of regulatory protection but possibly "instantaneous", "cheap" and "rebellious"?

GS

That is not my opinion, but I can't argue that you are wrong. As per your OP, it could be cheaper. As per your and my posts, it could circumvent currency controls. For example were you in Venezuela, the west bank of Israel, Eritrea, Russia ...... then you might be better using bitcoin.

As for how different the process would be, I've not used Western Union so can't compare. However I have found using lightning very easy. Using it "properly" somewhat less so.

There is a difference from Visa that I regard as unimportant, but Mike4 regards as a serious problem. The customer pays for the transaction with bitcoin and lightning, while the merchant pays with Visa.

Bitcoin use and mining is banned in China, but there is evidence that it continues. Indeed before the ban the bulk of mining was in China. The ban didn't bring the network down and very shortly it was as big again. The bitcoin network has had only two outages in it's entire existence, Visa can't claim the same over the same number of years.

Lightning is a lot younger, and I think had more problems in the early days. However it is currently just as decentralized as bitcoin, so likely to be as robust. One thing to understand is that it is developing and changing.

Because lightning transactions are cheap, you can pay small sums cheaply. There are minimums to what you can pay using Visa.
Podcast 2.0 allows you to remit small sums for the value that you receive. At least one lightning wallet has a built in podcast player to help with this.

Lightning is also no longer just about payments. Don't forget all this stuff is based upon crytographics. You can use your lightning address as an ID with things like the social media Nostr, to validate communication etc.

The whole subject is far, far, bigger than just an alternative to Visa.

[murraypaul]

Because lightning transactions are cheap, you can pay small sums cheaply. There are minimums to what you can pay using Visa.

I've bought a single banana with Visa.

A merchant might choose to impose a minimum amount before they will accept Visa, that isn't a Visa limitation, and major supermarkets have no minimum. It is still cheaper and more convenient for them than handling cash.

[Urbandreamer]

Because lightning transactions are cheap, you can pay small sums cheaply. There are minimums to what you can pay using Visa.

I've bought a single banana with Visa.

A merchant might choose to impose a minimum amount before they will accept Visa, that isn't a Visa limitation, and major supermarkets have no minimum. It is still cheaper and more convenient for them than handling cash.

As per my previous post. The MERCHANT pays for Visa. Hence it is very likely that they will refuse a payment that provides you with the goods but costs them more than the cost price of the goods.

As the customer pays for lightning transactions the merchant gets the full price of the goods so transaction costs are not a reason to refuse payment.

If you read the cash thread there was an example where the merchant provided the goods on a verbal IOU that cash would be paid later as the Visa charges would be too much for the merchant.
https://lemonfool.co.uk/viewtopic.php?p=600463#p600463

[1nvest]

If your relative currently has no Bitcoin, or interest it in, then just a normal bank transfer/western union/... is a much better option for a one-off payment.

In the case of a one-off payment, I'd second that statement.

I'm still currious about which "app" GS's mother was looking at.

Re "trustless": it isn't possible for ANY bank transaction. ALL banking is trust based. Not just the "Trustees savings bank" (TSB).
https://en.wikipedia.org/wiki/TSB_Bank_(United_Kingdom)

As has been pointed out on this thread, to be "trustless" there must be no party to the transaction that needs to be trusted. There are in fact many advantages to trust based systems, to the extent that they are actually being introduced to bitcoin.
https://fedimint.org/
You don't need to worry about loosing your money, because a group of people (Trustees) that you trust secure it.

Trust based solutions have been at the heart of international money movements since it was done by the Knights Templar.
https://bigthink.com/the-past/knights-t ... s-finance/

However either on chain bitcoin, or provided that you run your own node, lightning, can be used in a trustless manner with modern digital communication.
It "can" be cheaper, and of course it can avoid currency controls. Either would certainly be my choice to remit "money" into or out of certain countries or occupied territories.

Back I think to GS. What country is your Mother trying to remit to? Can you tell us?

As simple as it may be to you, personally I find crypto confusing, don't understand it, so avoid it as in don't invest in what you don't understand Buffett advice.

My hope is that brokers/funds might step up to offer alternatives. Say for instance ii started a fund backed by 67/33 global stock/gold and provided a simple mechanism whereby different ii users could transfer shares between themselves, peer to peer, perhaps via simply touching phones. Share price 200p, item costing £10, transfer 5 shares transferred between buyer and seller accounts. Negate banks and Pound altogether. If offshored then even domestic reporting burdens might be mitigated. Similar I guess to crypto, but where instead of being backed by Pounds (British CBDC) - that tends to lose purchase power over time, or Bitcoin, where the value is too volatile, to instead be backed by something (global stock/gold 67/33) that is more inclined to increase purchase power whilst not being too value volatile. Pretty global as well as 67/33 global stock/gold is relatively stable/consistent in a wide range of currencies/countries.

The UK/BoE/government in pushing CBDC are putting the Pound at great peril IMO. Fads can grow rapidly and if many transferred over to receiving/paying via something like the above then the Pound is inclined to potentially significantly decline, inducing inflation, that further pushes it even lower and where central bank interventions have minimal/no effect. To counter that risk involves some pretty extreme controls/laws/international cooperation and much loss of personal privacy. It's a battle the BoE is more inclined to lose IMO.

In regard to trustless, I can't see how that can be possible other than if something is transferred in person between two parties, otherwise something or some other entity will be involved one way or another.

[Urbandreamer]

As simple as it may be to you, personally I find crypto confusing, don't understand it, so avoid it as in don't invest in what you don't understand Buffett advice.

That is ALWAYS good advice. Personally it took me significant time to gain my understanding of the stock market, CFD's and spread bets. Of course quite a bit of time to get a basic understanding of crypto as well. I would not recommend doing any of those without learning about them. Indeed having learned, you may decide that they are a bad idea.

In regard to trustless, I can't see how that can be possible other than if something is transferred in person between two parties, otherwise something or some other entity will be involved one way or another.

AH, well you are half right. Why "in person"? Would that be so that you know that both there is no middle man and that the transfer IS to the second party?

Ok, let us ignore money and talk secret messages during a time of war, or indeed any message that can not be allowed to be altered in transit. Well we secure such with codes or cryptography.

You can have a trustless money system IF only the recipient can get the payment. Others can't intercept the transaction and steal it. That's the basis of exchanging crypto. Note that I'm using the word money, rather than currency. This means that it can all exist simply on a ledger with nothing but data moving around. It's all just two party's exchanging cryptographic keys. No trusted middle man, such as banks or money transfer agents, who receive the funds then pass them on.

The investment case is more nebulous. It's based upon the utility, desirability and scarcity of the crypto. The first two are good reasons to decide to avoid crypto, or reasons why it makes sense to invest. It's all a matter of opinion.

One point though is that lightning is a means of transfer, it is not a vault to store value.

OH Ps, if people are interested in learning about bitcoin, or how to start learning about it, can I recommend.

Why you shouldn’t buy Bitcoin.

https://www.realbedford.com/investing-in-bitcoin
Article on the Real Bedford FC website.

[murraypaul]

As per my previous post. The MERCHANT pays for Visa. Hence it is very likely that they will refuse a payment that provides you with the goods but costs them more than the cost price of the goods.

But they don't. They sold me a banana.

They are willing to absorb the occasional expensive transaction for the overall savings they get.

[Urbandreamer]

But they don't. They sold me a banana.

Ah forgive me. You were not talking crypto or methods of transaction but Bananas!

We all know that Bananas are a special case.

Banana economics: buy 942lb of fruit, give it away - and make pounds 25 profit

https://www.independent.co.uk/news/bana ... 83219.html

[1nvest]

Ok, let us ignore money and talk secret messages during a time of war, or indeed any message that can not be allowed to be altered in transit. Well we secure such with codes or cryptography.

You can have a trustless money system IF only the recipient can get the payment. Others can't intercept the transaction and steal it. That's the basis of exchanging crypto. Note that I'm using the word money, rather than currency. This means that it can all exist simply on a ledger with nothing but data moving around. It's all just two party's exchanging cryptographic keys. No trusted middle man, such as banks or money transfer agents, who receive the funds then pass them on.

The 'ledger' is distributed, where the valid version of that is the common matching version, and where that network is large so requires a attacker to control more than 50% of the network. However attack methods are possible where regular miners can be redirected towards more rewarding alternatives (ledgers) such that a state entity, say China, could rise to being the remaining majority at a point in time, perhaps even just briefly, with less than 10% of the regular total network capacity, maybe with no intent to steal, but instead to corrupt the ledger such that the accepted 'correct' version of the ledger rolling forward from there was whatever the combined Chinese systems version of the ledger reflected. A target, such as the West, over-reliance upon that ledger, seeing it having been corrupted and all of its money/value having been wiped out ... keys no longer work due to the corrupted/attacked version.

Defence/security has to be 100% all of the time, attacks only have to win once. Attacks will tend to target the weakest point such as the above, or perhaps by penetration of the official version of the systems code, have a 'buggy' new release distributed out across the network and where that bug facilitates penetration/corruption.

A common weak point, that doesn't apply in conventional banking where ledgers are also distributed but disconnected/private, isolated from hacking. Physical money also cannot be made to instantly all disappear.

Furthermore imagine such a network created in the 1980's DOS days of 8 bit encryption that were difficult/time intensive to crack at that time, but with technological advances can nowadays be cracked near instantly. A copy of today's ledger potentially might be entirely open to view in say 20 years time. I wouldn't have trust if my current bank sent me a monthly statement marked as confidential if that also came with a notice that in 20 years time its records would be free/open for anyone to read. Mr Dreamer, we (HMRC) note that 20 years ago you reported that years income of £x but our records show £y, we're suspending your access to banking (money) and passport (travel) until such times that we have further investigated the discrepancy.

In cryptography there is only one truly secure method, a one time pad created using a real random source and where the keys are at least as long as the message being encrypted and where the keys are only used once. That requires pre-shared keys (pad) that are passed physically/directly, not transmitted through communications layers. Even then all valid potential versions of the message (that make sense) may still be visible to a attacker, just that they wont be able to definitively say which was the actual message, but could still potentially point to the most probable version. In all other cases cryptography is based upon mathematical difficulty to solve, that as computing power grows takes increasingly less time to solve. Secure/private at the time, but with time-limits on the period of privacy.

[GoSeigen]

Our payment processor does not charge a minimum amount. It's 2.x% (depending on vendor) of transaction of any size. We'd prefer not to pay the fee but it gets us extra business.

GS