https://www.youtube.com/watch?v=gF_ZQ_eijP

Introducing Checklock: The Time Function Revolutionizing Bitcoin and Streaming Money

Video transcription

I call this talk streaming money and, if, if you’re, watching Bitcoin from the outside if you’re engaged in Bitcoin, but don’t have the time to spend, to watch every new technological innovation that is being created with Bitcoin, it’s hard to see, what’s happening behind the scenes And what’s happening behind the scenes is a lot very interesting work. Bitcoin today is not Bitcoin as it was in 2009. It’s continuously changing with new technologies being introduced, and the pace that technologies are being introduced keeps accelerating one of the most fascinating aspects of Bitcoin that was introduced towards the end of 2015, which I’m very very interested in is the introduction into Bitcoin of a time Function, so what this new invention did is an introduced time function to transactions, the ability to control the timing of when a transaction can be redeemed when it can be spent. That particular invention is called a check, or lock.

Time-Verifying Bitcoin: A Powerful Tool for Locking and Saving Money on the Lightning Network

Time verify, which is a very engineering word for something very powerful, and at first, when you look at it, you think, okay great, so I can put my money. I can lock it and I can say this money can’t be withdrawn for 90 days. Okay, if some of you have problems with addiction to shopping or you know, materialist, consumption kind of attitude and you can save money unless you lock it away that could be useful. Okay, you could use it just like that. Just lock my money away for 90 days and the nice thing about the Bitcoin network is that when you put a condition like lock it away for 90 days, it’s locked away for 90 days. There’s absolutely nothing! Anyone can do to undo that particular constraint.

Unlocking the Time Dimension of Money through Bitcoin’s Lightning Network and State Channels

But if you look at this time dimension purely from the perspective of locking an individual amount of money, you’re missing the point because what’s really interesting about this – is that it creates a whole new set of applications that allow you to manage the time dimension of money And this is a game changer and most people haven’t really noticed that things are going to get very interesting very fast in some of the new developments in Bitcoin, one of the first applications that use check, lock, time, verify and check sequence verify, which is the two Time-Based constraints is a technology called state channels or payment channels, or more broadly lightning network. How many of you have heard of state or payment channels here? Okay, so that was about fifteen or twenty hands? How many of you have heard of Lightning Network? Okay, great? That was about 75 % of the audience and how many of you understand Lightning Network? We got a lot of this myself included: ok, very complex technology.

Exploring the potential of bi-directional payment channels in Bitcoin’s Lightning Network.

So what I want to do is briefly describe this technology and then give you a perspective on something much much deeper. That can happen with this technology, so bi-directional payment channels allow you to do transactions between two parties that are not recorded directly on the Bitcoin blockchain but essentially mean exchanging promises that have a time dimension and then setting up this bi-directional payment channel. Where I say: okay, let’s I’m going to put 10 euros away to communicate with this. Let’s say it’s a bartender at a bar right, so I’m going to put 10 euros into multi-sig accounts and then we’re going to set up a payment channel between us and we’re going to say. Ok, I buy one drink, that’s let’s say: 1-0, it’s a very cheap drink, and so now I’m going to sign a transaction that says of those ten heroes that we have in a multi-sig.

Lightning Network Enables Seamless Streaming Money Transactions in Real-Time

Together, I’m going to give one euro to you and nine euros back to me now hold on to that transaction because I’m not done drinking great five minutes later I say that was a lovely drink. I want another one, I’m going to make a new transaction. This one is going to cancel the previous transaction, which we still haven’t broadcast and it’s going to say well now, I’m going to give you two euros out of the ten and I’m going to get a refund of eight now hold on to that transaction. It invalidates the previous one, the bartender, if they want to submit it, they submitted they get their two euros, but when they do that, I also get my eight euros change. So I’m happy they’re happy. We can both walk away from this transaction anytime we like, and we now have transferred this money, but none of its yet on the blockchain. Now this is a really really good night, so I’m going to have another drink, and now I new transaction that says I’m going to give you three euros.

Exploring the Potential of Bi-Directional Payment Channels and Routed Networks for Lightning and Streaming Money in Bitcoin.

You give me seven back and we keep going back and forth like this. Until eventually, I say okay, I want to close my tab. The last transaction we have, maybe four or five heroes and drinks five euros refund – is the transaction that actually gets recorded on the blockchain. So we did four transactions, but only one to start and one to end were recorded on the Bitcoin blockchain and that’s really interesting, because in the process of doing that, I could create as many transactions as I wanted. And I could make these as small as I wanted, because we’re not paying a fee for them. We only paying a fee for the final balance, so I could be transmitting very, very small amounts in this payment channel bi-directional payment channels are really interesting technology, but when it gets even more interesting is when you combine multiple, bi-directional payment channels to create a routed Network.

Lightning Network Enables Seamless Payment Channels and Side Bets in Social Situations

So I’m sitting there with my friend I’m having drinks and they’re having drinks and we have two payment channels to the bar right and right now I owe five heroes to the bar and my friend owes maybe six euros to the bar and we decide to play A game of pool – and so I start a game of pool with my friend and we place a bet and we say whoever wins it’s five euros, we’re gon na place. The side bet on our game of pool. So we start playing pool great and I lose because I suck at the pool right so so I lose badly. My friend might also be a hustler in pool and hiding this, so I lose very badly okay. So now I owe my friend five euros. Well, I could pay directly and start a new payment channel with my friend, but here’s what I could do.I could go to the bar and say he owes you five. Well, let’s say here’s you six and I are you 5.

Lightning Network’s Payment Channels Enable Seamless and Efficient Money Streaming on Bitcoin

How about you changes so that he only owes you one, and I owe you 10 great so now we’ve got 2 payment channels, I close mine, paying extra to the bartender and he closes and signs another transaction to pay less. For my friend, essentially, I’ve paid my friend, but without having any direct connection with them. Right now, take that and imagine connecting tens of thousands of payment channels together on the network. That is routed where I can basically go out and discover the network and say that guy I want to give him a tenth of a Bitcoin. Now I’m not connected to that guy, but he’s connected to that guy that guy’s connected to this guy. This guy’s connected to that guy and I am connected to that guy.

Lightning Network Enables Trustless and Speedy Bitcoin Transactions for Streaming Money Use Cases

So I will give you one euro, but only if you give it to him who only if it gives it to him only if he gives it to my final destination, and when the euro arrives at the final destination you get paid, which then means they get Paid, which means they get paid, which means they get paid, which means I paid them right and that’s Lightning Network in a nutshell, right Lightning Network is just a series of Bitcoin transactions that we exchange among each other and here’s where it gets funky, because the really Interesting thing about this is that the the speed at which I can process these transactions, these transactions that are fully formed, Bitcoin transactions guaranteed by the Bitcoin network, any one of the parties can walk away at any time. We don’t have to trust each other. We can take the last transaction, which is the most valid one.

Lightning Network Enables Secure and Lightning-Fast Bitcoin Transactions for Small Amounts.

We can submit it to the network and close all the channels anytime, we want so we always have Bitcoin, acting as a judge to ensure that all of our transactions we’ve exchanged are secure. But now we can do them as fast as we can process elliptic curve signatures as fast as we can process transmitting these payment transactions. And how fast is that milliseconds? We can do them for amounts that are as small as one Satoshi. So now I can transmit satoshis in milliseconds, across a network of tens of thousands of participants that are all connected at a layer above Bitcoin stop there for a second take some questions that that’s really good, so in the legal terms, is 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.

Lightning Network: A Trustless and Secure Solution for Streaming Money in Bitcoin

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 their route great. It takes two hundred and thirty three 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 the web 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.

Exploring the Privacy and Smart Contract Features of Lightning Network for Bitcoin Transactions

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, you have no idea. If the next person you’re sending it to is at the end of the transaction or they’re going to relay it somewhere else, you have only one hop information, and so it also massively increases privacy and anonymity. Let’s take some more questions. Yes, this is a smart contract. These are 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 the relative time from the previous transaction and a new invention called long 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 correctly. Why would an intermediary want to do this for a number of reasons? One of the reasons they would want to do this.

Lightning Network Enables Low-Cost, Efficient Transactions for Bitcoin Users.

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 lightening 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.

Multiple hops in the Lightning network can reduce settlement costs on the blockchain, says expert

Anybody who charges high fees will 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 using a big route? So the question was sorry, let me repeat the question: 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 two 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.

Lightning Network and Payment Channels Expand Bitcoin’s Transaction Capacity, While Core Blockchain Scaling Remains Inevitable

Let’s take two more questions for lightning without on-chain scaling. Won’ this pushes transaction fees away from the miners and therefore compromises bitcoins’ 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 use to set up the payment channel and you need a settlement transaction. If and when you decide to close the payment channel and and and so you still need transactions, what it expands is the ability to do a lot more transactions in between that two-bit. 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.

Exploring the Compatibility and Flexibility of Lightning Network in Bitcoin and Cryptocurrencies

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. In fact, the 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 verification, then, yes, you can run a 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, alright great. So now we have a basic understanding. I hope everybody’s got a basic understanding.

The Lightning Network’s Bilateral Obligations Enable Streaming Money and Challenge Traditional Container-Based Thinking of Money.

The Lightning Network is this thing that can be layered on top of Bitcoin, creating these bilateral obligations that allow you to stream money at a different scale in time. Here’s a bit that no one’s noticed yet, which is that when you change the medium, the message changes when you change the granularity of time. Very strange things start to happen right now. We think of money primarily because of the containers of money, the containers of money control. The way we think about money, each type of container for money imposes certain restrictions on how that money is used and we tend to think of money in terms of the containers it comes in rather than as its pure form of transmittable value.

The Impact of Slow Banking Transactions on Salary Payments and the Nature of Pay in the Age of Bitcoin, Lightning, and Streaming Money

All of that means this, if it takes three to five business days, to make a bank transaction as it does in the slowest banking country in the world, which is the United States if it takes 24 hours to make a banking transaction if it costs certain Money, those things affect the behavior of people who are using money through the system right, so how many of you here are paid by salary? Okay and how many of you receive your salary automatically through a bank account? Okay, that’s almost 3/4 of the audience great and how often do you get paid once a month? Why now? This is a question we haven’t really considered. What is the nature of pay and why does it occur at monthly intervals? Why do we chunk money at monthly intervals there’s a very good reason. This is money acquiring the characteristics of its container, the medium of banking payments, the accounting systems, and the ability to pay employees are constrained. It gets expensive to make transfers more often using the banking system right.

The Rise of Streaming: How it’s Changing the Way We Consume and Experience on the Internet, Including Money with Bitcoin’s Lightning Network

So let’s look at some parallels in history before right now. We’re living on the internet in the era of streaming streaming has become one of these enormous lis, powerful concepts that are changing the way we consume various things. The way we experience various things on the Internet, so, for example, mp3 music, is disappearing. Why? Because I don’t want to hold 30,000 mp3s on my mobile device when I can stream them in real-time from a provider, so how many people here have stopped storing mp3s on their mobile devices and use the streaming service? Great, that’s it! 75 percent of the audience. This concept didn’t exist 10 years ago. A lot of us who were involved in the internet recognized at some point the value of storing the data versus streaming. It lives with Switch and no one would store their own music collection. In fact, now a lot of the value comes from the editorial, the curation, the DJ, and the playlist, right?

The Evolution of Music Consumption: From Permanent Ownership to Valuing Experience

If I take the 30,000 mp3s that I have on my laptop and I hit shuffle bad things happen, why? Because I have a very broad multi-genre music collection. So I may go from Tchaikovsky to Iron Maiden to Justin Bieber in three minutes, and you know that may damage my psyche, especially if I end with Justin Bieber. Okay, I don’t actually own any Justin Bieber, but just as an example the bottom line is that we now value not the permanence of music but the experience of music, and it’s changed. How we experience music. The same thing happened with video cassettes. Do you remember when you had to go to the store, to get a video cassette for anybody who’s on the 30? A video cassette is this plastic thing that you have to rewind kind of like a DVD, only suckier. Now, if you experience movies that way, it changes your experience right, you have a limited catalog. You have to consider very carefully what you buy. You experience it in a different way. You actually sit down through a whole movie and enjoy it.

Streaming Technology: How it Changed Our Expectations for Video and Music and its Potential Impact on Bitcoin’s Lightning Network and Streaming Money

Now we have streaming video. We’ve changed our expectations and it hasn’t just changed our expectations in terms of using Netflix. The really important impact is with the emergence of things like YouTube right, so we’ve gone from experiencing video content in an hour and a half to experiencing video content in 15 minutes to now experiencing video content in thirty-second vines and instills right, and so that experience is Completely different something happened there when you change the container that changed the actual experience of video. Now you could start experiencing video in much smaller amounts. It could be created by a whole lot of people. You’ve never met who didn’t have any production values and still sometimes be, quite surprisingly, good streaming. Video changes the nature of video streaming, and music change, the nature of music.

Revolutionizing Salaries: The Impact of Streaming Money on Real-Time Payments with Bitcoin and Lightning

What happens when we start streaming money so now think about this for a second, if I can do payments that are on a millisecond frequency and that are as low as a Satoshi, why not get your salary paid every minute now? This has some really important implications if you think about it. Purely from the perspective of salary, now you’re working in real-time, money becomes a real-time thing and its nature fundamentally changes.I watched this video the other day, which was a team at a university that created a camera that could take one trillion frames per second and then…