A New Twist On Lightning Tech Could Be Coming Soon to Bitcoin

Bitcoin's lightning network may be just starting to send transactions over the blockchain, but already its developers are looking to rearchitect the technology.

Several lightning developers - Lightning Labs co-founder 'Laolu' Osuntokun and Blockstream's Christian Decker and Rusty Russell - have published a new proposal which imagines an alternative, "Simplified" way of making off-chain transactions called eltoo.

Eltoo, on the other hand, only stores the most recent off-chain transaction data, solving the well-known "Information asymmetry" problem - that is if something happens to the device you're running your lightning app on - say your smartphone - you might lose access to the whole history of data.

"With eltoo, we reduce the risk of funds being swept away. We remove this toxic information," said Decker, who noted that the proposal's name is a joke of sorts - the phonetic spelling of "L2," which stands for layer-two, what many people call technology like lightning that pushes transactions off-chain.

Developers have long been trying to come up with a way for users to make a bunch of transactions using bitcoin, without bloating the blockchain with unnecessary data.

The first attempt to do this was way at the beginning of bitcoin's history when off-chain transaction capabilities were experimented with using so-called "Sequence numbers" to keep track of which off-chain transaction is the most recent.

Miners could just broadcast the one transaction where Alice's balance drops to $9. While it's unclear why a miner might want or decide to not revoke a transaction for another one, they could decide to do so since there was no enforceability.

Every state update - Alice sending Bob money, for instance - is composed of two transactions, each of which both parties store and which totally replace the prior update transaction.

With eltoo, each lightning node doesn't need to store all the intermediary states, rather, it stores only the most recent version and some information about the transaction itself, such as it's corresponding settlement transaction and potentially the HTLCs that spend from that settlement, the post notes.

"Eltoo has quite different tradeoffs. I'm not implying it's better in all senses," Decker told CoinDesk, pointing to some arguments on the bitcoin developer mailing list about the technology increasing waiting times for transactions to be settled.