Mastering the Lightning Network

Appendix A. Bitcoin Fundamentals Review

The Lightning Network is capable of running above multiple blockchains, but is primarily anchored on Bitcoin. To understand the Lightning Network, you need a fundamental understanding of Bitcoin and its building blocks.

There are many good resources that you can use to learn more about Bitcoin, including the companion book Mastering Bitcoin, 2nd Edition, by Andreas M. Antonopoulos, which you can find on GitHub under an open source license. However, you do not need to read a whole other book to be ready for this one!

In this chapter, we’ve collected the most important concepts you need to know about Bitcoin and explained them in the context of the Lightning Network. This way you can learn exactly what you need to know to grasp the Lightning Network without any distractions.

This chapter covers several important concepts from Bitcoin, including:

• Keys and digital signatures

• Hash functions

• Bitcoin transactions and their structure

• Bitcoin transaction chaining

• Transaction outpoints

• Bitcoin Script: locking and unlocking scripts

• Basic locking scripts

• Complex and conditional locking scripts

• Timelocks

Keys and Digital Signatures

You may have heard that bitcoin is based on cryptography, which is a branch of mathematics used extensively in computer security. Cryptography can also be used to prove knowledge of a secret without revealing that secret (digital signature), or prove the authenticity of data (digital fingerprint). These ...