CBP CBP Lightning Network and Layer 2 Solutions 2 — Questions and Answers
Question 1: What does 'inbound liquidity' mean in the Lightning Network?
- The amount of Bitcoin a node has mined
- The capacity available to receive payments through a channel (Correct answer)
- The number of nodes connected to a routing hub
- The transaction fee set by a node
Correct answer: The capacity available to receive payments through a channel
Inbound liquidity refers to the funds on the counterparty's side of a channel, allowing you to receive payments.
Question 2: Which type of Lightning Network node gives users full control of their private keys?
- Exchange-hosted custodial nodes
- Custodial wallet nodes
- Self-hosted non-custodial nodes (Correct answer)
- Mining pool nodes
Correct answer: Self-hosted non-custodial nodes
Non-custodial Lightning nodes are self-hosted where the user controls their own private keys and channel funds without relying on a third party.
Question 3: What is a 'watchtower' in the context of the Lightning Network?
- A server monitoring Bitcoin prices
- A third-party service monitoring channels for fraudulent closing attempts (Correct answer)
- A blockchain explorer service
- A node that validates new Bitcoin blocks
Correct answer: A third-party service monitoring channels for fraudulent closing attempts
A watchtower is a service that monitors the blockchain on behalf of offline Lightning nodes to detect and penalize fraudulent channel closure attempts.
Question 4: What penalty mechanism deters cheating in Lightning Network channel closures?
- A fine paid to the Bitcoin Foundation
- The honest party can claim all channel funds if the other broadcasts an old state (Correct answer)
- The cheating party's node is banned from the network
- Miners blacklist the cheater's address
Correct answer: The honest party can claim all channel funds if the other broadcasts an old state
If a party broadcasts an outdated channel state to cheat, the other party can use a 'justice transaction' to claim all the channel's funds as a penalty.
Question 5: What use case does the Lightning Network enable that is impractical on-chain?
- Large institutional Bitcoin transfers
- Micropayments of fractions of a cent (Correct answer)
- Multi-signature cold storage
- Miner block rewards
Correct answer: Micropayments of fractions of a cent
Lightning enables micropayments far too small to be practical on-chain due to Bitcoin transaction fees, enabling pay-per-second streaming and tipping.
Question 6: What is a 'submarine swap' in the Lightning Network?
- A physical exchange of Bitcoin at sea
- An atomic swap between on-chain Bitcoin and Lightning Network Bitcoin (Correct answer)
- A method to anonymize Bitcoin transactions
- A protocol for mining in underwater data centers
Correct answer: An atomic swap between on-chain Bitcoin and Lightning Network Bitcoin
A submarine swap is an atomic exchange that allows converting between on-chain Bitcoin and Lightning Network Bitcoin without trusting a third party.
CBP CBP Lightning Network and Layer 2 Solutions 2
What does 'inbound liquidity' mean in the Lightning Network?