 That that's really good. So in the legal terms, it's an assignment of claims. It's a series of IOUs It's a series of forward-looking promises But the thing is that if a party doesn't deliver on on their forward promise They can't collect on the promise that's coming to them in a routed network So you extend these promises out to your final destination They provide the unlocking code that rolls it back so that everybody gets paid So you don't have to trust anybody in between if someone doesn't fulfill their promise in between you just start a different route to get to your destination no one can Take money without Fulfilling the terms of the contract. It's a system of smart contracts So you don't need to trust any of the other participants In fact if this is properly implemented you have no idea who the other participants are you just say I'm paying Alex a tenth of a Bitcoin find me a route great It takes 233 hops to get there. I don't care just like you have no idea how your TCP packet Actually got to Google you don't care And it's the same system in fact It's better because the first implementation of lightning network that we're building is based on onion routing like Tor So every connection is encrypted which means that when you receive a lightning network promise You have no idea if the person sending it to you is the person who started the transaction Or it's someone who's just reeling it from someone else and you have no idea of the next person You're sending it to is the end of the transaction or they're going to relay it somewhere else you have only one hop information and And so it also Massively increases privacy and anonymity. Let's take some more questions. Yes This is a smart contract. This is smart contracts using three technologies in Bitcoin One is multi-signature technology The other one is check lock time and check sequence verify mostly check sequence verify which is relative time from the previous transaction and a new invention called hash lock time contracts which is A way to forward a promise that can only be unlocked by a secret Yes, so these are smart contracts using Bitcoin. Correct. Why would an intermediary want to do this for a number of reasons? One of the reasons they would want to do this is because using this also involves Participating in the network So you just do it because you want to use the lightning network Another reason you want to do it is because you can collect a fee So part of the option there is to make very very small fees payable to intermediaries if you want And you could then select the route that gives you the lowest fees or the route that gives you the lowest latency And you can use a whole marketplace of services to implement that Yes, yes, this would introduce transaction fees, but you can talk about transaction fees on a whole different scale because Because you're not required to fill a capacity that is very limited Which is a one megabyte block the fees that are likely to be used for something like a lightning hub are going to go Close to the marginal cost of delivering that service, which is tiny Tiny so you're going very close to zero anybody who charges high fees We'll get pushed out of the market by people who charge much lower fees And if nobody else wants to do it, I'll do it Yes, yes Well, you don't settle any of these hops on the blockchain Because actually what you're doing when you're when you're using a big route So the question was sorry, let me repeat the questions If you use a route that's less costly but has more hops won't that introduce more settlement costs on the blockchain? No, because as you in fact when you create lots and lots of hops what you're doing is you're Canceling out bilateral obligations between the parties involved in the hops So if now instead of you know party to owing party three now they owe a bit less So you can actually balance out all of the settlements. It will actually reduce the settlements on the blockchain We don't know yet how this is going to play out in terms of scalability, but I'm very excited. Let's take two more questions for lightning Without on-chain scaling won't this push a transaction fees away from the miners and therefore compromise Bitcoin's long-term decentralization and scaling No, it won't because for every payment channel you need an anchor transaction Which is the one you set you used to set up the payment channel and you need a settlement transaction if and when you decide to close the the payment channel and And and so you still need transactions what it expands is the ability of Doing a lot more transactions in between those two Yes, so there is the possibility that it's too expensive to go between channels in which case We're also going to need to scale up the core Bitcoin blockchain layer, which I think is inevitable. We're going to do both This is not about a choice between scaling on one layer or another. It's about scaling at every layer What these technologies do is they offer you leverage so so when you scale One megabyte on the lower layer that effect is multiplied by a thousand on the layer above So you can have this multiplier effect last question on lightning That will lightning network be compatible with Bitcoin unlimited that is entirely up to the Bitcoin unlimited developers to choose whether they want to introduce that if they introduced segregated witness and They've already introduced check lock time verify then yes, you can run lightning network on top of that You can run lightning network on top of Ethereum. You can run lightning network on top of any cryptocurrency that enables the three basic Primitives of checking hashes multi-signature contracts and lock time time based controls So it's a network that can be overlaid over anything All right, great. So now we have a basic understanding. I hope everybody's got a basic understanding The lightning network is this thing that can be layered on top of Bitcoin creating these bilateral obligations That'll allow you to stream money at a different scale in time