CBP CBP Lightning Network and Layer 2 Solutions 1 — Questions and Answers
Question 1: What is the Lightning Network primarily designed to solve?
- Bitcoin's energy consumption
- Bitcoin's scalability limitations for fast, low-cost payments (Correct answer)
- Bitcoin's mining difficulty adjustments
- Bitcoin's block storage capacity
Correct answer: Bitcoin's scalability limitations for fast, low-cost payments
The Lightning Network is a second-layer protocol designed to enable fast, low-cost Bitcoin transactions off-chain to address scalability limitations.
Question 2: What is a payment channel in the Lightning Network?
- A direct blockchain transaction between two parties
- A mining pool connection method
- A two-party off-chain transaction mechanism funded by an on-chain transaction (Correct answer)
- A hardware wallet connection protocol
Correct answer: A two-party off-chain transaction mechanism funded by an on-chain transaction
A payment channel is an off-chain mechanism where two parties lock funds in a multi-sig transaction and can transact freely until the channel is closed on-chain.
Question 3: What is required to open a Lightning Network payment channel?
- A mining license
- An on-chain Bitcoin transaction to fund the channel (Correct answer)
- A KYC verification process
- Permission from the Bitcoin Foundation
Correct answer: An on-chain Bitcoin transaction to fund the channel
Opening a Lightning channel requires broadcasting an on-chain funding transaction that locks Bitcoin into a multi-signature address.
Question 4: What happens when a Lightning Network channel is closed?
- The funds are permanently locked
- The final channel balance is broadcast to the Bitcoin blockchain (Correct answer)
- The funds are sent to miners as fees
- The channel can only be closed by miners
Correct answer: The final channel balance is broadcast to the Bitcoin blockchain
When a Lightning channel closes, the final state of balances is settled in a closing transaction broadcast to the Bitcoin blockchain.
Question 5: What is 'routing' in the Lightning Network?
- Directing miners to new blocks
- Sending payments through intermediate nodes to reach a destination (Correct answer)
- Assigning IP addresses to Bitcoin nodes
- Organizing transactions in the mempool
Correct answer: Sending payments through intermediate nodes to reach a destination
Routing in Lightning means payments can travel through multiple connected nodes to reach a recipient without a direct channel.
Question 6: What is the purpose of Hash Time-Locked Contracts (HTLCs) in the Lightning Network?
- To encrypt wallet seed phrases
- To ensure atomic payment routing across multiple hops without trust (Correct answer)
- To mine Bitcoin faster
- To store blockchain data off-chain
Correct answer: To ensure atomic payment routing across multiple hops without trust
HTLCs ensure that multi-hop Lightning payments are atomic — either the full payment completes or funds are returned, enabling trustless routing.
CBP CBP Lightning Network and Layer 2 Solutions 1
What is the Lightning Network primarily designed to solve?