Electrum 4.0 Release: Lightning Network, Watchtowers, PSBT & Submarine Swaps
Last week, the long-awaited version 4.0 of the popular Electrum bitcoin wallet finally appeared, which has a number of exciting new features. For example, the latest version offers support for the Lightning Network, Watchtowers, Partially Signed Bitcoin Transactions (PSBT) and Submarine Swaps.
The integration of the Lightning Network into the open source Electrum bitcoin wallet is exciting, because the wallet has been popular among bitcoiners for many years. The integration of the Lightning Network in the latest version of the software can therefore make an important contribution to the further adoption and growth of the Lightning Network.
Electrum 4.0. is finally released. It supports PSBT, Lightning, Watchtowers, Submarine swaps. Please take time to read the release notes before you enable Lightning. Thanks to all contributors!
With the Lightning Network, Bitcoin transactions can be done very quickly and cheaply. The network exists as a two-layer network 'on top of' the Bitcoin network and aims to increase transaction capacity and speed and to enable new functionality.
Via the Lightning Network, users can make mutual transactions via Payment Channels, only occasionally registering the final or intermediate position on the Bitcoin blockchain. This can be done between two people, but you can also set up a whole network of users: the Lightning Network. A single bitcoin transaction can thus represent a multitude of Lightning Network transactions.
That is interesting because the normal Bitcoin transaction costs in the form of a miner's fee can be spread with this and the transaction speed is no longer limited by the block time of 10 minutes that applies on the Bitcoin blockchain. Transactions Through the Lightning Network are almost instant and they cost only a fraction of a cent. This opens the doors for a multitude of applications such as micro-payments. The Lightning Network also offers privacy benefits and more options, which allow for example atomic swaps or token issuance for digital assets.
The Lightning Network actually consists of a complex web of individual payment channels between users. Within these payment channels, funds are shifted back and forth like a kind of jigsaw puzzle, but it sometimes happens that liquidity gets stuck on one side. In that case, channels must be closed and / or new channels opened and that costs 'on-chain' transaction costs on the Bitcoin blockchain.
With Submarine Swaps that is not necessary and as a user you can easily refill your Lightning Network wallet for a small payment. Normally you have to open and close channels yourself, but via a Submarine Swap you simply send bitcoins to a bitcoin address of a Swap provider (in this case Electrum itself) that returns the same amount of bitcoins via the Lightning Network in return. When that is done, the previously sent bitcoins are released to the Swap provider and if not, the code returns the bitcoins automatically. Watchtowers Another problem facing the Lightning Network is that users should actually stay online to check open channels, otherwise a malicious counterparty would be able to close the channel based on an outdated 'intermediate score'. In principle, the Lightning Network penalty mechanism then comes into effect, but your lightning node must be online to detect the fraud.
Watchtowers are a way of outsourcing that control to a third party, so that you don't have to keep your lightning node online continuously.
Partially Signed Bitcoin Transactions (PBST)
Partially Signed Bitcoin Transactions (PBST) are, as the name implies, Bitcoin transactions that are partially signed. This is useful, for example, for transactions where several parties have to sign. Nowadays, the well-known MultiSig or MuSig is often used for this, but they have the disadvantage that the transaction must be built in one go before it can be sent to the network. Everyone must therefore first sign before the transaction is offered to the network.
With a PSBT this is not necessary and it is possible to send a partially signed bitcoin transaction to the network. Other parties involved can then view and verify the PSBT at a later time and if they agree, they can also sign with their private keys.
Originally released in 2011 by Thomas Voegtlin (but later helped by others), Electrum was one of the first 'light wallets' to make bitcoin accessible to a wider audience. With a light wallet, or SPV wallet, you don't have to run your own node or download the entire blockchain, which makes bitcoin a lot more user-friendly for many people. Today, most bitcoin wallets are light wallets.
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However, keep in mind that if you use a light wallet, there is a little more trust involved than if you run your own bitcoin node such as with the Bitcoin Core wallet. With light wallets you connect (unless you set otherwise) to a bitcoin node of someone else. Cryptography still protects your bitcoins against theft, but you have to trust that the bitcoin node you are connecting to provides you with the correct information about the blockchain. This can be important during a hard fork or an attack on the network. Also, the privacy of light wallets is a bit more vulnerable, because the bitcoin node you connect to may be able to see which transactions come from you. For many people these are acceptable risks in most cases, but running your own bitcoin node is essential for the highest degree of security.