[Klathmon]

>Could you point me to details about how cross-channel rebalancing happens?

Lightning transactions are less like TCP packets, and more like water in a pipe. If I put 1 ml of water in a pipe full of water, 1 ml comes out the other end, but it's not the same water.

It works like this:

I can give you 1 apple, but I contractually obligate you to give 1 apple to my friend Bob, and if you don't you get penalized. You won't actually give Bob the apple I gave you, you'll give him another apple that you have, and if you don't know exactly where bob is, you could give an apple to someone else, telling them to eventually give an apple to bob "or else". (in LN, the "or else" is actually cryptographically secure pre-created transactions)

Because of this, each 1:1 channel is actually a network of 1:1 channels that can move in both ways.

In my first example, there was an unwritten implication that you would have a connection to coinbase somehow through another channel. So if I paid you 1 BTC for something, and you have a connection with coinbase (either directly, or through another channel), then if I buy from coinbase they can send that money "through" you to recharge our channel, without you really "spending" any money. And you are more than happy that happened, because now I can buy more from you directly through our channel, so you might incentivize that kind of routing by setting an extremely low, or even zero, or even NEGATIVE! fee.

>Does that imply that every channel needs to make an on-chain transaction every few days to reopen/keep the channel open?

No, locktimes only come into play in the case of non-compliance. If we have a channel with a 3-day locktime, on day 2 we can agree to re-up our lock for another 3 days (really at any time we can), we can also agree to close it right now if we want, all off the blockchain. Only when you either try to cheat, or become non-responsive do locktimes come into play.

[shazow]

Sorry, I didn't mean in layman metaphors but the actual mechanics. (I am technical and fairly familiar with Bitcoin, I'm just having a hard time convincing myself from reading the Lightning whitepaper and I'm hoping to find some alternative explanations that are clearer.)

Like what kind of transactions/operations need to happen between nodes for two channels to get rebalanced?

> No, locktimes only come into play in the case of non-compliance. If we have a channel with a 3-day locktime, on day 2 we can agree to re-up our lock for another 3 days (really at any time we can), we can also agree to close it right now if we want. Only when you either try to cheat, or become non-responsive do locktimes come into play.

Right, I understand that it's for non-compliance, that's why I was assuming that this part has to happen on-chain.

Aren't timelocks enforced on chain? How can we agree to extend our timelock without committing that agreement to the blockchain?

I understand that the premise of timelocks is that if there's a conflict, the channel collapses and the timelock buffer period allows the victim a period to claim restitution (hence needing to stay online or have a service do it on their behalf).

[Klathmon]

>Like what kind of transactions/operations need to happen between nodes for two channels to get rebalanced?

So "rebalancing" is kind of a word for a side-effect of normal routing.

It's all based on fees. So if you have a channel with "the network" (either through 1 or more channels to a big hub, or some other way), and I have a single channel with you, then another channel with "the network".

Our channel started off with .5 BTC from each of us. Then I paid you .4 BTC so the channels are:

You: .9 BTC, Me: .1 BTC.

Nodes broadcast fees, so you would broadcast that for me to send money from me to you (either directly, or through a "hop"), it will cost 20 satoshis. But you can also broadcast that for someone to send money the opposite direction (from you to me), it's free right now. Someone that wanted to pay a 3rd party unrelated to us would try to find a route that went from you to me then to the rest of the network.

So really "rebalancing" is just incentivizing someone else to rebalance your channel by exploiting their selfishness and want of low transaction fees and to include you as part of a hop. Fees can even go negative, which would make it super beneficial for someone else to include your channel in their transaction (even if it's out of the way, or doesn't serve any real purpose) to get a bit of money from it!

Who actually broadcasts the fees can be found by looking through popular node software (each node only broadcasts one direction of the channel, and I don't remember which it is right now), as well as the broadcast system (which I genuinely don't know off the top of my head).

>Aren't timelocks enforced on chain? How can we agree to extend our timelock without committing that agreement to the blockchain?

Yes and no. They are "enforced" on chain in the sense that they can't be accepted into a block until a specific block number. But they aren't ever broadcast to anyone else until you are ready to use them. In essence all LN transactions are created, but kept secret until ready to be used. The whole concept of LN relies on the fact that if we make a transaction but never broadcast it, did it really happen? If you and me agree to make a new transaction saying "this expires in 3 days from right now", technically the original transaction is now valid once 3 days pass from it, but if you try to broadcast the tx that forces all the money to you, I can broadcast the transaction that proves that we did something else after that (our second "update the locktime"), and then gives all the money to me.

Every time we do something to transact, we also create a set of transactions that serve as proof that the old transactions are in fact "old" and shouldn't be accepted, and if anyone tries to broadcast them, we can invalidate them (and enforce a "penalty" to dissuade anyone from trying to cheat).