⚡ [Analysis] Why Bitcoin’s Lightning Network is ingenious - Todd Kronenberg

Todd Kronenberg breaks down the accounting theory behind Bitcoin's ($BTC) Lightning Network (LN). The LN, Kronenberg explains, is double entry accounting layered on top of Bitcoin's triple entry accounting system, the blockchain. Triple entry accounting, however, has one obvious drawback: information dispersion. Since all transactions must go through the blockchain, it is necessarily slow. By layering double entry accounting, which involves only two actors, on top of the Bitcoin's blockchain, a system of quick transactions backed by trustless security is formed. On the LN, users can exchange assets limited to the total amount available in a LN channel. The channel is off the blockchain, but funds are secured by accounting information stored on the blockchain: the blockchain records the beginning and ending values of each LN channel, making it a closed system.