DEV Community: Abba Adamu

Bitcoin - A dummy's technical guide to the bitcoin ecosystem part 2 (Addresses)

Abba Adamu — Tue, 02 Apr 2024 09:40:41 +0000

📜 Objective

The goal of this article is to help you

understand the various types of Bitcoin addresses and their impact on transactions
- Legacy (P2PKH)
- Nested SigWit (P2SH)
- Native SegWit (Bech32)
- Taproot (P2TR)

📜 Introduction

Welcome to the second part of the series. incase if you haven't already gone over the first part, please ensure you check it out here Bitcoin - A dummy's technical guide to the bitcoin ecosystem part 1. So you would have a better understanding of this part.

In this part we'll be talking about the different bitcoin addresses and what forms of improvement they bring into the Bitcoin ecosystem. we may get a little technical in this article but hey it's nothing we can't handle right?

Now let's get to it shall we?

📜 Understanding Bitcoin addresses

Now we know that the Bitcoin address is a fundamental part of the Bitcoin ecosystem that ensures transaction validations, generation of digital signatures and a host of important functionalities. Owing to the importance of Bitcoin addresses, over the years there have been multiple updates via soft forks to the Bitcoin network that have added improvements to Bitcoin addresses and their impact on the Bitcoin network.

📜 Why do we have different Bitcoin address types?

Have you ever wondered why there are multiple Bitcoin addresses and what improvements they bring into the Bitcoin ecosystem?. Keep reading for a brief breakdown.

Well around 2016 and 2017, there was a discussion or debate around the Bitcoin Block size which was 1 mb per block and so only a limited amount of transactions could be added to a block. The accepted solution was to take a part of the transaction called the witness data and move it to a second layer on the blockchain there by allowing more space for transactions on the main block and increasing the block size naturally allowing more transactions to fit into a block.

Now Let's do a quick walkthrough of the various Bitcoin addresses with some quick facts.

📜 Legacy Address a.k.a Pay-to-Public-Key-Hash (P2PKH)

This is the oldest of all Bitcoin addresses. In fact, it is the original Bitcoin address and has a prefix of 1.

Quick Facts

They are accountable, stable and universally supported.
Transactions via Legacy addresses have are large in size, meaning they take up more block space.
transactions from Legacy addresses have high transaction fees due to the size of the transactions
Legacy addresses are not SegWit compatible what this means is that on the Bitcoin network, only Legacy addresses can carry out transactions with with each other i'e send and and receive BTC.
Legacy addresses have long transaction processing times.

📜 Nested SegWit a.k.a Pay-to-Script-Hash (P2SH)

This address is an improvement over Legacy addresses the implements better scalability, security and smaller block size their by enabling multiple transactions on the blockchain without having too much of an impact on the the Bitcoin blockchain size. it has a prefix of 3.

Nested SegWit was launched around 2017 and it basically reduced the size of each Bitcoin transaction's data by isolating part of the transaction signature data from the main transaction data.

Quick Facts

They have cheeper transaction fees and enhanced security over Legacy addresses thy achieve this through multi-signature capabilities.
Nested SegWit addresses have cross compatibility meaning transactions can be carried out between Nested SegWit and other types of Bitcoin Addresses.
The introduction and implementation of Nested SegWit gave birth to the Lightning Network

📜 Native SegWit a.k.a pay-to-witness-public-key-hash (Bech32)

This type of Bitcoin address has a prefix of "bc1q" and it is an upgrade to the Nested SegWit. It is also compatible with most wallets and exchanges by default. Native SegWit has a primary focus on weight efficiency, which brings about a reduction in the weight of Bitcoin blocks and this weight reduction naturally translates to faster transaction speeds, which enhances the network’s scalability and further lowers the transaction fees.

Quick Facts

Native SegWit Bitcoin addresses are in lowercase for enhanced readability and better error detection

📜 Taproot a.k.a Pay-to-Taproot (P2TR)

Taproot is by far one of the coolest things to have ever happened to the Bitcoin ecosystem.

This Bitcoin Address type has a prefix pf "bc1p" and has the lowest transaction fees of all existing Bitcoin Address types. Taproot (P2TR) is a new address format that was introduced in 2021 as an update to the Segwit address type. One major shift in the dynamics of bitcoin addresses via Taproot is that it implements the Schnorr digital signature which is a shift from the conventional Elliptic curve digital signature algorithm previous bitcoin address types have of used for years.

Quick Facts

Taproot aims to make bitcoin transactions cheeper, more efficient, private and also unlocks the potential of smart contracts on the bitcoin network via a couple of new implementations one of which is a system called the Merklized Abstract Syntax Trees (MAST) which enables conditions placed on a transaction to be condensed and hashed into one script.
The Schnorr digital signatures which Taproot makes use of allows for transaction grouping. what this means is that multiple transactions from a bitcoin wallet can be hashed together and assigned a unique key. Simple and complex transactions containing multiple signatures would naturally be indistinguishable via this hashing.

Quick Link: https://tara-annison.medium.com/what-are-taproot-mast-and-schnorr-signatures-b737dae20681

📜 Conclusion

The best part about an open blockchain system is how it is community driven and so over time improvements are welcomed and accepted to further scale the network. So Which of the Bitcoin addresses would you be making use of?

Thanks for staying till the end, Goodbye and see you in the next one.

📜 Useful links

Check out these links for further reading

Simulate your first Lightning transaction on the Bitcoin regtest network Part 1 (MacOS)

Abba Adamu — Sat, 30 Mar 2024 17:38:33 +0000

Objective

The goal of this article is to help you

configure the Bitcoin environment
create a Bitcoin wallet
create an address, give it a label
mine some blocks to that address
configure two Lightening nodes

📜 Introduction

This was me after I recently started my journey in Bitcoin development.

I felt so overwhelmed by the resources online mainly because I found out that certain information where either left out or now deprecated. so I was inspired to write my take on this topic because it confused me the most.

📜 Requirements

To be able to follow along, you must have both bitcoind and lnd installed.

Below are two articles that helped me through this topic's installation, setup, and research phases.

Their work heavily inspires this article and has made use of references appropriately.

Author	Article	Study flow
Peter Tyonum	How to Setup Bitcoin Core and Lightning Network Node Developer Environment	Start here
Michael Goldstein	Setting Up a Bitcoin/Lightning Network Test Environment	Go here next

⚙️ My system specs

Machine: MacBook Pro
Operating System: macOS Monterey
terminal: kitty
shell: ZSH
Editor: Neovim
Package Manager: Homebrew

📜 The boring but very important stuff

Before we get to copying and pasting stuff into our terminal(the fun part), let's look at what the internet has to say about the following:

The lightning network and how it interacts with the Bitcoin network
The various Bitcoin network modes.

"The Lightning Network is a second-layer protocol built on top of the Bitcoin blockchain. It enables faster and cheaper transactions by creating off-chain payment channels between users. These channels allow multiple transactions to occur without needing to be recorded on the main Bitcoin blockchain. Instead, only the opening and closing transactions of the channel are settled on the blockchain. This interaction reduces congestion on the Bitcoin network and enables microtransactions with almost instant settlement times."

📡 The Bitcoin testnet network mode

"It’s a public test blockchain where the bitcoin does not have a real-world value that works similarly to the mainnet blockchain. In this way, it is safe to test out some functionality." source: https://studygroup.moralis.io/

📡 The Bitcoin regtest network mode 👈🏿 (this is the mode we are going to be using)

*"Regtest (regression test) mode creates a local private blockchain where you can adjust the parameters to what you want. You usually use this when it is not needed to communicate with other peers and blocks. An example of what you can do with the parameters is you can create blocks instantly"*Source: https://studygroup.moralis.io/

📡 The Bitcoin signet network mode

*"Signet is a proposed new test network parallel to the Bitcoin network. Like testnet and regtest, developers would use signet as a testing environment. Unlike the Bitcoin mainnet or the other test networks, signet would use digital signatures to validate blocks, not a Proof-of-Work system."*Source: https://river.com/

Now to the good stuff:

⚙️ Configuring our Bitcoin environment

Step 1a

This part is very important. if you have gone over the Setting Up a Bitcoin/Lightning Network Test Environment as I suggested above you would realize that the author manually created a bitcoin.conf but we'll be using the one at /Users/user/Library/Application Support/Bitcoin/bitcoin.conf auto-generated while installing bitcoin core.

now let's open up the autogenerated bitcoin.conf file with our text editor

nvim /Users/user/Library/Application Support/Bitcoin/bitcoin.conf

Add these settings below

# Daemon Options
server=1
daemon=1
fallbackfee=0.00072
txindex=1
mintxfee=0.0001
txconfirmtarget=6

# Network Options
regtest=1
#signet=1
#testnet=1

[regtest]
# RPC Options
rpcport=18443
rpcuser=bitcoin
rpcpassword=bitcoin

# ZMQ Options
zmqpubrawblock=tcp://127.0.0.1:28332
zmqpubrawtx=tcp://127.0.0.1:28333
zmqpubhashtx=tcp://127.0.0.1:28332
zmqpubhashblock=tcp://127.0.0.1:28332

Now, you can run your Bitcoin node service and the following commands from the terminal. Ensure your Bitcoin backend is all set and ready to run your lightning network.

Take note of the corresponding outputs to make sure you're on the right track. please note that I have truncated some outputs.

Start bitcoin service

$ bitcoind

Output:

Bitcoin Core starting

ensure you are on regtest

$ bitcoin-cli  getblockchaininfo

output:

{
  "chain": "regtest",  // 👈🏿 just making sure we are on the 'regtest' network
  "blocks": 526,
  "headers": 526,
...
}

create a Bitcoin wallet

$ bitcoin-cli createwallet "my_first_regtest_wallet"

output:

{
  "name": "my_first_regtest_wallet"
}

Create an address (we'll be generating a legacy address)

**Quick note: ** A legacy address refers to a format for cryptocurrency addresses that was used in older versions of the blockchain protocol. For example, in Bitcoin, legacy addresses typically start with the number "1". These addresses are still functional but are being gradually phased out in favor of newer address formats like Segregated Witness (SegWit) addresses, which offer benefits like lower transaction fees and improved scalability.

$ bitcoin-cli getnewaddress -addresstype legacy

output

mhF5zQHNn7wzaaQTpzRmtsNgPgFF94fxeY  //👈🏿 yours will be different

Assign a label to the address generated above to make it easy to identify it

 $ bitcoin-cli setlabel "mhF5zQHNn7wzaaQTpzRmtsNgPgFF94fxeY" "my_first_address"

get a list of all our generated addresses

 $ bitcoin-cli listreceivedbyaddress 1 true

output

[
  {
    "address": "mhF5zQHNn7wzaaQTpzRmtsNgPgFF94fxeY",
    "amount": 0.0,
    "confirmations": 0,
    "label": "my_first_address",
    "txids": []
  }
]

Mine some block to the address (This is important)

Quick note: I faced a sticky issue when trying to run my lncli commands and so after doing some research found a solution which was basically to generate some blocks check here to know more about the issue https://github.com/lightningnetwork/lnd/issues/1177#issuecomment-1100012559

 $  bitcoin-cli generatetoaddress 101 "mhF5zQHNn7wzaaQTpzRmtsNgPgFF94fxeY"

output

[
   "461c729e6afecd371a5dac52aa06955fbcaa41688b67d1130887a761ab972064",
  "793c537c37a6cea487b762fdb2ca0af6bf15797f5f8f9847fe07dcf982cdc6b4",
  "422a76fd34cbf65743416f1e256129935c04cd40cb81a80c891e28425f78974d",
  "1a987221c802116c70c18b2cdd1233ec906c0800835eac3fe9e489b17d911ce8",
  ...
]

Check our wallet info

$ bitcoin-cli getwalletinfo

Output

{
  "walletname": "my_first_regtest_wallet",
  "walletversion": 169900,
  "format": "sqlite",
  "balance": 137.5,
  "unconfirmed_balance": 0.0,
  "immature_balance": 471.875,
  "txcount": 122,
  "keypoolsize": 4000,
  "keypoolsize_hd_internal": 4000,
  "paytxfee": 0.0,
  "private_keys_enabled": true,
  "avoid_reuse": false,
  "scanning": false,
  "descriptors": true,
  "external_signer": false,
  "blank": false,
  "lastprocessedblock": {
    "hash": "0da2df1e8591e6ac00c1390fe397580b267c5b63a729f802e0bdd458aafb46f0",
    "height": 648
  }
}

⚙️ Configuring two LND nodes

Step 1a

we'll be creating a base or root directory called .lnd using the mkdir Linux command. please note that this directory can be named anything you wish same

$ mkdir ~/.lnd/.lnd1
$ mkdir ~/.lnd/.lnd2

Create a configuration file and add the settings below then save it as lnd.conf in the .lnd1 directory.

[Bitcoin]

bitcoin.active=1
bitcoin.regtest=1
bitcoin.node=bitcoind

[Bitcoind]

bitcoind.rpchost=127.0.0.1
bitcoind.rpcuser=bitcoin
bitcoind.rpcpass=bitcoin
bitcoind.zmqpubrawblock=tcp://127.0.0.1:28332
bitcoind.zmqpubrawtx=tcp://127.0.0.1:28333

Step 1b

Now just like in step 1a above, Create a configuration file add the settings below, and then save it as lnd.conf in the .lnd2 directory.

[Application Options]

listen=0.0.0.0:9734
rpclisten=127.0.0.1:11009
restlisten=0.0.0.0:8180

[Bitcoin]

bitcoin.active=1
bitcoin.regtest=1
bitcoin.node=bitcoind

[Bitcoind]

bitcoind.rpchost=127.0.0.1
bitcoind.rpcuser=bitcoin
bitcoind.rpcpass=bitcoin
bitcoind.zmqpubrawblock=tcp://127.0.0.1:28332
bitcoind.zmqpubrawtx=tcp://127.0.0.1:28333

**Quick note: ** Notice that the config above has different ports and settings for network, RPC, and REST connections configured. well, to mention a few reasons:

Each LND instance needs to listen on different ports to avoid conflicts.
You might want lnd1 and lnd2 to use different wallets or have different wallet configurations. _ You might configure different network settings for each LND instance. For example, one might be configured to run on the Bitcoin mainnet while the other runs on the Bitcoin testnet but note that it is required that you run the two LN nodes on the same network for the sake of running transactions between them

Step 2

lastly, let's configure some aliases so let's open up ~/.zshrc with our favourite text editor once again

nvim ~/.zshrc

Now add this to the bottom.

# local variables
export LND1_DIR="$HOME/.lnd/.lnd1"
export LND2_DIR="$HOME/.lnd/.lnd2"

# aliases
#lnd1
alias lnd1="lnd --lnddir=$LND1_DIR";
alias lncli1="lncli -n regtest --lnddir=$LND1_DIR"

#lnd2
alias lnd2="lnd --lnddir=$LND2_DIR";
alias lncli2="lncli -n regtest --lnddir=$LND2_DIR --rpcserver=localhost:11009"

This is the end of the first part of the series. we'll be going over some preliminary setup and configuration for a successful transaction between 2 lightning nodes in the next part

📜 Conclusion

you feel rushed, don't you? Don't worry It took me close to a week to understand this so it's fine if you don't entirely get what's going on for now. check out some of these useful links below chainquery: bitcoin-cli documentation

Simulate your first Lightning transaction on the Bitcoin regtest network Part 3 (MacOS)

Abba Adamu — Tue, 26 Mar 2024 11:02:11 +0000

📜Objective

The goal of this article is to help you

Connect the lightning nodes to form a peer
Open a payment channel between lnd1 and lnd2 nodes
Add some confirmations to the block that the channel opening transaction was mined on
Check the list of channels to ensure our channel is ready and funded
Create an invoice on lnd2
inspect the invoice created above from lnd1
Pay or satisfy the invoice created by lnd2 via lnd1
Close the payment channels, kill both Bitcoin and lightning daemons
Celebrate the success of this tutorial with a cold bottle of beer.

📜 Introduction

Hey there, welcome to the final part of this 3 part series on simulating your first lightning transaction.

If you are as happy as I am to finally wrap up the series, let's get right to it....

Prerequisites

To be successful in this tutorial in case if you haven't already gone through the previous parts leading up to this one, ensure you;

✅ checkout Part 1
✅ checkout Part 2
✅ Have a running Bitcoin network daemon (on regtest)
✅ Have two active and running lightning node instances as lnd1 and lnd2

If the above prerequisites list has been satisfied then you can proceed beyond this point.

📜 Connect the lightning nodes to form a peer

Now that both of our nodes are ready for some action, we need to connect them to form a peer-to-peer network this would enable our nodes to communicate with each other on the network by opening and closing channels.

From lnd1 run

command:

lncli1 listpeers

output:

{
  "peers": [] //👈🏿 no peers for now...let's fix that.
}

From lnd2 run the command below to get its identity_pubkey which we would use in connecting the node to lnd1

command:

lncli2 getinfo

output:

{
    "version":  "0.17.0-beta commit=fn/v1.0.1-85-ge31d15989",
    "commit_hash":  "e31d1598932a814c2d44b774e5110746295df711",
    "identity_pubkey":  "024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579",//👈🏿 copy this
    "alias":  "024baa5e16c118f42cdd",
...
}

Now let's connect lnd2 to lnd1 by passing the identity_pubkey, IP address and port

command:

 lncli1 connect 024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579@localhost:9734

output:

{} //👈🏿 don't worry this is the correct output.

Let's check for the list of peers once again at lnd1

command:

  lncli1 listpeers

output:

{
    "peers":  [
        {
            "pub_key":  "024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579",
            "address":  "127.0.0.1:9734",
            "bytes_sent":  "394",
            "bytes_recv":  "394",
            "sat_sent":  "0",
            "sat_recv":  "0",
            "inbound":  false,
            "ping_time":  "-1",
            "sync_type":  "ACTIVE_SYNC",
            .....
}]}

🎉 Both Nodes are now successfully connected as a peer on our local lightning network.

📜 Open a payment channel between `lnd1` and `lnd2` nodes

Now let's open up a payment channel between lnd1 and lnd2

Quick note: A payment channel on the lightning network is a two-way connection between two parties (lightning nodes) that enables them to exchange bitcoin.

To create a payment channel between lnd1 and lnd2, we'll be making use of the pub_key of lnd2 and we'll then be funding the channel with 100,000 SAT. the 100,000 SAT is lnd1's contribution to the channel

command:

 lncli1 openchannel 024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579 100000

output:

{
  "funding_txid": "0e5e4d4f8f793cddd9370eb81140d5bc168b0e32200a3a17177d9e4da26607b0"
}

📜 Mine some blocks to increase the confirmations for the Channel opening transaction

Once the channel has been created and lnd1's BTC contribution has been added to the channel, we need to mine/generate some blocks to increase confirmations for the Channel opening transaction.

command:

   bitcoin-cli -generate 10

output:

{
  "address": "bcrt1q5ltxhvn3essvq5ldzpfrvlhul73auec4ekg4fk",
  "blocks": [
    "518ab6ab9e6e93ef03be2da8a8f728358cb0d4270126d1770cdb223df52f9f11",
    "01f8a4a87c0c8c98697458e42bdb459af095ba90ad9ae165ac3c31be9addf447",
    "3880fe05eaf1cff356d7b035d619704a6b93893b225fb31a938ca7275488229c",
    "11e52d12e2d7547dd1f47a44d088bd59fd73c7c436b4076c03e51d78a3fba25e",
    ...
  ]
}

📜 Check the list of channels

Run the command below to check the list of active channels and to confirm that the channel between both nodes is well-funded and ready.

command:

    lncli1 listchannels

output:

{
    "channels":  [
        {
            "active":  true,
            "remote_pubkey":  "024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579",
            "channel_point":  "0e5e4d4f8f793cddd9370eb81140d5bc168b0e32200a3a17177d9e4da26607b0:0",
            "chan_id":  "735573279047680",
            "capacity":  "100000",
            "local_balance":  "96530",
            "remote_balance":  "0",
            "commit_fee":  "3140",
            "commit_weight":  "772",
            "fee_per_kw":  "2500",
            "unsettled_balance":  "0",
            "total_satoshis_sent":  "0",
            "total_satoshis_received":  "0",
            ...
        }
    ]
}

📜 Create an invoice on `lnd2`

Now that we have confirmed that our channel is ready for transactions, let's go ahead and create a payable invoice for an amount of 50,000 SAT on lnd2

command:

   lncli2 addinvoice --amt 50000

output:

{
  "r_hash": "28f35ccf79cfc8545351ae362b4fdb0f85437ddf452c1aebd399227607e0eb6e",
  "payment_request": "lnbcrt500u1pja5y06pp59re4enmeely9g5634cmzkn7mp7z5xlwlg5kp467nny38vplqadhqdqqcqzzsxqyz5vqsp58p5xllcxwt76rt7hjtjwuec2n5sfgv2t9kkc6vplrhsk2edj6ndq9qyysgqs8aysfmfz60jexh03kq27cmpym5qw8hw55wac4mqmj6t684t48u89kqaw0m7y0xuyygh5uuj95643gde3vse7zxgtu4aycfwfwk5z3cqfwmtp7",
  "add_index": "1", //👈🏿 total amount of invoices created.
  "payment_addr": "38686fff0672fda1afd792e4ee670a9d2094314b2dad8d303f1de16565b2d4da"
}

Let's quickly inspect or confirm the details of this newly created invoice from lnd1 by making use of the invoice's payment_request

command:

   lncli1 decodepayreq lnbcrt500u1pja5y06pp59re4enmeely9g5634cmzkn7mp7z5xlwlg5kp467nny38vplqadhqdqqcqzzsxqyz5vqsp58p5xllcxwt76rt7hjtjwuec2n5sfgv2t9kkc6vplrhsk2edj6ndq9qyysgqs8aysfmfz60jexh03kq27cmpym5qw8hw55wac4mqmj6t684t48u89kqaw0m7y0xuyygh5uuj95643gde3vse7zxgtu4aycfwfwk5z3cqfwmtp7

output:

{
    "destination":  "024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579",
    "payment_hash":  "28f35ccf79cfc8545351ae362b4fdb0f85437ddf452c1aebd399227607e0eb6e",
    "num_satoshis":  "50000",
    "timestamp":  "1708790266",
    "expiry":  "86400",
    "description":  "",
    "description_hash":  "",
    "fallback_addr":  "",
    "cltv_expiry":  "80",
    "route_hints":  [],
    "payment_addr":  "38686fff0672fda1afd792e4ee670a9d2094314b2dad8d303f1de16565b2d4da",
    "num_msat":  "50000000",
    "features":  {
        "8":  {
            "name":  "tlv-onion",
            "is_required":  true,
            "is_known":  true
        },
        ...
    }
    ...
}

📜 Pay or satisfy the invoice created by `lnd2` via `lnd1`

Time for lnd1 to pay up 🧾

Run the command below and follow the prompts to confirm payment

command:

  lncli1 payinvoice lnbcrt500u1pja5y06pp59re4enmeely9g5634cmzkn7mp7z5xlwlg5kp467nny38vplqadhqdqqcqzzsxqyz5vqsp58p5xllcxwt76rt7hjtjwuec2n5sfgv2t9kkc6vplrhsk2edj6ndq9qyysgqs8aysfmfz60jexh03kq27cmpym5qw8hw55wac4mqmj6t684t48u89kqaw0m7y0xuyygh5uuj95643gde3vse7zxgtu4aycfwfwk5z3cqfwmtp7

output:

Payment hash: 28f35ccf79cfc8545351ae362b4fdb0f85437ddf452c1aebd399227607e0eb6e
Description:
Amount (in satoshis): 50000
Fee limit (in satoshis): 2500
Destination: 024baa5e16c118f42cddd95fd828b32fa8dfcfea55fa384e89e2da0f3b96fc4579
Confirm payment (yes/no): yes
+------------+--------------+--------------+--------------+-----+----------+-----------------+----------------------+
| HTLC_STATE | ATTEMPT_TIME | RESOLVE_TIME | RECEIVER_AMT | FEE | TIMELOCK | CHAN_OUT | ROUTE |
+------------+--------------+--------------+--------------+-----+----------+-----------------+----------------------+
| SUCCEEDED | 0.086 | 0.565 | 50000 | 0 | 761 | 735573279047680 | 024baa5e16c118f42cdd |
+------------+--------------+--------------+--------------+-----+----------+-----------------+----------------------+
Amount + fee: 50000 + 0 sat
Payment hash: 28f35ccf79cfc8545351ae362b4fdb0f85437ddf452c1aebd399227607e0eb6e
Payment status: SUCCEEDED, preimage: 071ae531770166a26d7b42a82a6215776a4f90f1e9935c1f225077158b3782c9

Now that we have made payment, let's look up the invoice on lnd2 we'll be using the payment hash above

command:

    lncli2 lookupinvoice 28f35ccf79cfc8545351ae362b4fdb0f85437ddf452c1aebd399227607e0eb6e

output:

 {
    "memo":  "",
    "r_preimage":  "071ae531770166a26d7b42a82a6215776a4f90f1e9935c1f225077158b3782c9",
    "r_hash":  "28f35ccf79cfc8545351ae362b4fdb0f85437ddf452c1aebd399227607e0eb6e",
    "value":  "50000",
    "value_msat":  "50000000",
    "settled":  true,// 👈🏿 the invoice has been fulfilled ✅
    "creation_date":  "1708790266",
    "settle_date":  "1708793723",
    "payment_request":  "lnbcrt500u1pja5y06pp59re4enmeely9g5634cmzkn7mp7z5xlwlg5kp467nny38vplqadhqdqqcqzzsxqyz5vqsp58p5xllcxwt76rt7hjtjwuec2n5sfgv2t9kkc6vplrhsk2edj6ndq9qyysgqs8aysfmfz60jexh03kq27cmpym5qw8hw55wac4mqmj6t684t48u89kqaw0m7y0xuyygh5uuj95643gde3vse7zxgtu4aycfwfwk5z3cqfwmtp7",
    "description_hash":  "",
    "expiry":  "86400",
    "fallback_addr":  "",
    "cltv_expiry":  "80",
    "route_hints":  [],
...
}

📜 Close the payment channel, kill both Bitcoin and lightning daemons

"Eventually, all good things must come to an end"

We are finally done with all lightning transactions so let's go ahead and close the payment channel and kill all running lightning and Bitcoin daemons as we close for the day.

Run the command below from any of the two nodes

command:

    lncli2 closeallchannels

output:

{
  "remote_pub_key": "02e0810d836946eebaeb9186c45ebb0c2d17294890ec67f488c9127de4d51dd3cd",
  "channel_point": "0e5e4d4f8f793cddd9370eb81140d5bc168b0e32200a3a17177d9e4da26607b0:0",
  "closing_txid": "9b9e88eec1d3708d97588088e6e40cd0d3cc65163baabb5215445785268f5b78",
  "error": ""
}

Check the list of channels

command:

    lncli2 listchannels

output:

{
  "channels": [] //👈🏿 no active channel
}

Run the command below to kill all running daemons

command:

     lncli1 stop && lncli2 stop && bitcoin-cli stop

output:

Bitcoin Core stopping

📜 Conclusion

Finally, an amazing end to a three part journey.

I hope this article helped you gain some hands-on experience in working with the lightning network. Remember, Lightning payments are faster, cheaper and less complex than the conventional bitcoin transaction. see you in the next one 👋🏿

Simulate your first Lightning transaction on the Bitcoin regtest network Part 2 (MacOS)

Abba Adamu — Tue, 26 Mar 2024 10:56:19 +0000

📜Objective

The goal of this article is to help you

confirm that we have the correct bitcoin.conf settings
spin up a Bitcoin network
Ensure we are on the regtest network
Prepare the first lightning node aka lnd1 for some action
- Spin up node
- Create wallet
- Get some information about the node
- Generate an Address
- Fund the lnd1 wallet with some bitcoin
- load up our existing local Bitcoin wallet
- send some bitcoin to generated lnd1 wallet address (to be sent to lnd2 later on)
- Check wallet balance
Prepare the second lightning node aka lnd2 for some action

📜 Introduction

Welcome to Part 2 of our series, fellow Bitcoin/Lightning developers. I'm sure you're itching for some action...

This is the second part of a two-part series and in case you haven't already read the first part go over here Part 1 so you can fully maximize this second part.

📜 Some boring but very important stuff to get us started

The Lightning Network is a second-layer protocol built on top of the Bitcoin blockchain and it enables faster and cheaper transactions by creating off-chain payment channels between users. These channels allow multiple transactions to occur without needing to be recorded on the main Bitcoin blockchain. Instead, only the opening and closing transactions of the channel are settled on the blockchain.

The Regtest (regression test) Bitcoin network mode creates a local private blockchain where you can adjust the parameters to what you want. For this demonstration, we would run our lightning network on top of an active Bitcoin network running a local private blockchain (regtest)

Quick note: throughout this article, long output codeblock data are truncated

The easy part:

⚙️ Confirming our Bitcoin environment and spinning up a Bitcoin daemon

To confirm that our settings are correct to spin up the required Bitcoin network mode, open up the autogenerated bitcoin.conf located at /Users/user/Library/Application Support/Bitcoin/bitcoin.conf with a text editor

Command:

nvim /Users/user/Library/Application Support/Bitcoin/bitcoin.conf

Output:

# Daemon Options
server=1
daemon=1
fallbackfee=0.00072
txindex=1
mintxfee=0.0001
txconfirmtarget=6

# Network Options
regtest=1
#signet=1
#testnet=1

[regtest]
# RPC Options
rpcport=18443
rpcuser=bitcoin
rpcpassword=bitcoin

# ZMQ Options
zmqpubrawblock=tcp://127.0.0.1:28332
zmqpubrawtx=tcp://127.0.0.1:28333
zmqpubhashtx=tcp://127.0.0.1:28332
zmqpubhashblock=tcp://127.0.0.1:28332

Now let's follow through the following steps

📜 Spin up a Bitcoin network (regtest network)

Command:

bitcoind

Output:

Bitcoin Core starting

📜 Ensure we are on the regtest network

Command:

bitcoin-cli  getblockchaininfo

output:

{
  "chain": "regtest",  // 👈🏿 just making sure we are on the 'regtest' network
  "blocks": 526,
  "headers": 526,
...
}

📜 Prepare the first lightning node aka `lnd1` for some action

We'll be preparing our first lightning node now so go ahead and open up two new shell tabs or terminal windows and follow the following steps to spin up both of our previously configured lightning nodes respectively.

First Tab:

Let's go ahead and start up our first node

command:

lnd1

output:

2024-02-14 02:38:18.958 [INF] LTND: Version: 0.17.0-beta commit=fn/v1.0.1-85-ge31d15989, build=production, logging=default, debuglevel=info
2024-02-14 02:38:18.958 [INF] LTND: Active chain: Bitcoin (network=regtest)
2024-02-14 02:38:18.958 [INF] RPCS: Generating TLS certificates...
2024-02-14 02:38:18.960 [INF] RPCS: Done generating TLS certificates
2024-02-14 02:38:18.961 [INF] RPCS: RPC server listening on 127.0.0.1:10009
2024-02-14 02:38:18.963 [INF] RPCS: gRPC proxy started at 127.0.0.1:8080
2024-02-14 02:38:18.963 [INF] LTND: Opening the main database, this might take a few minutes...
2024-02-14 02:38:18.963 [INF] LTND: Opening bbolt database, sync_freelist=false, auto_compact=false
2024-02-14 02:38:19.003 [INF] LTND: Creating local graph and channel state DB instances
2024-02-14 02:38:19.069 [INF] CHDB: Checking for schema update: latest_version=31, db_version=31
2024-02-14 02:38:19.069 [INF] CHDB: Checking for optional update: prune_revocation_log=false, db_version=empty
2024-02-14 02:38:19.069 [INF] LTND: Database(s) now open (time_to_open=106.471482ms)!
2024-02-14 02:38:19.069 [INF] LTND: We're not running within systemd or the service type is not 'notify'
2024-02-14 02:38:19.069 [INF] LTND: Waiting for wallet encryption password. Use `lncli create` to create a wallet, `lncli unlock` to unlock an existing wallet, or `lncli changepassword` to change the password of an existing wallet and unlock it.

Second Tab:

Now let's create a wallet, run the command below and follow through the wallet creation prompts

command:

 lncli1 create

output:

Input wallet password:
Confirm password:

Do you have an existing cipher seed mnemonic or extended master root key you want to use?
Enter 'y' to use an existing cipher seed mnemonic, 'x' to use an extended master root key
or 'n' to create a new seed (Enter y/x/n): n

Your cipher seed can optionally be encrypted.
Input your passphrase if you wish to encrypt it (or press enter to proceed without a cipher seed passphrase):

Generating fresh cipher seed...

!!!YOU MUST WRITE DOWN THIS SEED TO BE ABLE TO RESTORE THE WALLET!!!

---------------BEGIN LND CIPHER SEED---------------
 1. absorb     2. mammal    3. thank    4. isolate
 5. depart     6. trigger   7. legal    8. unhappy
 9. purchase  10. strong   11. effort  12. kangaroo
13. entry     14. solve    15. flower  16. mule
17. buyer     18. today    19. cancel  20. material
21. pupil     22. napkin   23. employ  24. ill
---------------END LND CIPHER SEED-----------------

!!!YOU MUST WRITE DOWN THIS SEED TO BE ABLE TO RESTORE THE WALLET!!!

lnd successfully initialized!

Let's go ahead and fetch some basic information about our node. Run the command below

command:

lncli1 getinfo

output:

{
    "version":  "0.17.0-beta commit=fn/v1.0.1-85-ge31d15989",
    "commit_hash":  "e31d1598932a814c2d44b774e5110746295df711",
    "identity_pubkey":  "02e0810d836946eebaeb9186c45ebb0c2d17294890ec67f488c9127de4d51dd3cd",
    "alias":  "02e0810d836946eebaeb",
    "color":  "#3399ff",
    "num_pending_channels":  0,
    "num_active_channels":  0,
    "num_inactive_channels":  0,
    "num_peers":  0, //👈🏿 take note of this number (our node is a bit lonely for now)
    "block_height":  547,
    "block_hash":  "10f9fb091fd2b83736ffde6621100d6db40b09fad3676c7930dce1821c31066a",
    "best_header_timestamp":  "1707215728",
    "synced_to_chain":  false,
    "synced_to_graph":  false,
    "testnet":  false,
    "chains":  [
        {
            "chain":  "bitcoin",
            "network":  "regtest"
        }
    ],
....
}

Time to create an address that would receive the bitcoin sent to the lightning node wallet

command:

lncli1 newaddress np2wkh

output:

{
  "address": "2N5qZ8TNWbrkaYxmsLYjEd8g6U7CrjDfHky"
}

Let's load up our Bitcoin wallet from the previous tutorial, send some juicy 100 Bitcoin from it to our lightning address above and then generate some blocks to give it some confirmations

"my oh my!!, what a man could do with some real 100 btc just sitting in a wallet 🤤. Alight alright that's enough buddy, don't be weird let's get back to the article."

Run the commands below in sequence

command 1:

bitcoin-cli loadwallet my_first_regtest_wallet

output:

{
  "name": "my_first_regtest_wallet"
}

command 2:

bitcoin-cli sendtoaddress 2N5qZ8TNWbrkaYxmsLYjEd8g6U7CrjDfHky 100

output:

3d36c8fc08f3ffd82bfa4e2aa33a63bf6c254bb46ffa1309fb9c7eb99adb3848

command 3:

bitcoin-cli generatetoaddress 10 "mhF5zQHNn7wzaaQTpzRmtsNgPgFF94fxeY"

output:

[
  "2fb9db66a292f9f37260be1490833d7cb4b1d5442478be67fd3d7c48281271c5",
  "7f284d403862117a21461da7cfdc3437a870fd608d0afe5e672c5c378ea2bc73",
  "4b4e867a02e49145f71b662fa4fea2a30eeff0d9a689953b655222ef2e336bd4",
  ...
]

Let's go ahead and check our lnd1 wallet balance

command:

lncli1 walletbalance

output:

{
  "total_balance": "10000000000", //👈🏿 sweet, our wallet was credited successfully
  "confirmed_balance": "10000000000",
  "unconfirmed_balance": "0",
  "locked_balance": "0",
  "reserved_balance_anchor_chan": "0",
  "account_balance": {
    "default": {
      "confirmed_balance": "10000000000",
      "unconfirmed_balance": "0"
    }
  }
}

📜 Prepare the second lightning node aka `lnd2` for some action

To get the second lnd node configured and running, repeat all the steps we followed above but this time around, funding the lnd2 wallet with some bitcoin is optional as this node would be on the receiving end of our transaction.

📜 Conclusion

We'll conclude here. Thank you for staying with us until the end of the second part. In the final part, we'll walk through connecting peers, opening payment channels, and other processes necessary for a valid lightning transaction.

📜 Useful links

part 1 of the series

Bitcoin - A dummy's technical guide to the bitcoin ecosystem part 1

Abba Adamu — Tue, 26 Mar 2024 10:31:31 +0000

📜Objective

The goal of this article is to help you

Get a rough view of what a cryptocurrency is.
Gain some foundational understanding of What Bitcoin is
- make sense of the name Satoshi Nakomoto (unfortunately the name of an anime protagonist)
- understand some Bitcoin terminologies
understand the difference between Bitcoin and bitcoin
understand Bitcoin wallets
understand Bitcoin addresses
- Hashing
- Legacy (P2PKH)
- Nested SigWit (P2SH)
- Native SegWit (Bech32)
- Taproot (P2TR)

📜 Introduction

I know you must have heard a lot about Bitcoin and how it has made a lot of people filthy rich over the years.

But beyond all the hype, do you understand the technology and infrastructure Bitcoin is layered upon? My job in this series is not to overload you with too many technicalities but to give you enough dumb down knowledge to help lean your curiosity in the right direction.

📜 What is a cryptocurrency

The word cryptocurrency can be broken down into two parts

crypto: a short form for the word cryptography which is a mathematical domain of knowledge that deals with the encryption and decryption of data. remember how Batman uses his wrist computer thingy to decipher passwords for locked doors? now that process is data decryption which is a vital fragment of cryptography.

📜 What is `bitcoin (BTC))`

Quick note: Bitcoin was released in 2009 by some anonymous nerd or group of nerds under the name Satoshi Nakamoto.

Who is Satoshi Nakamoto?

After asking Google the same question I got this:

"Satoshi Nakamoto is the name used by the presumed pseudonymous person or persons who developed Bitcoin, authored the bitcoin white paper, and created and deployed bitcoin's original reference implementation."Wikipedia

I believe the developer or developers of bitcoin maintained anonymity for a good cause, seeing as the Bitcoin infrastructure promotes heavy anonymity by obfuscating various data on the network via encryption it maybe wouldn't have made sense to have attached a face to the invention. But don't take my word for it, I'm also a dummy trying to understand Bitcoin.

📜 A definition of sorts

bitcoin (BTC) is a cryptocurrency, a virtual currency designed to act as money and a form of payment outside the control of a centralized system say your typical bank, so there's no need for third-party involvement in transactions. bitcoin (BTC) is also rewarded to blockchain miners for verifying transactions and can be purchased in specialized markets called exchanges.

📜 What is a cryptocurrency exchange?

Well, it's a market that provides a platform for customers to swap one cryptocurrency into another and to also buy cryptocurrencies.

📜 The difference between `Bitcoin` and `bitcoin`

Owing to my explanation above, bitcoin (BTC) is simply the currency or native token used in transactions on a cool type of network that connects computers/nodes to form peers called a peer-to-peer network. What makes this type of network cool is that all participating nodes have the liberty to verify transactions and add them into a book of records or you can call it a ledger as part of a collection of other transactions called a block which is then append it to the end of another Block to form a chain of blocks. hence the name blockchain.

Quick Note: for clarity, Transactions are grouped into Blocks which are then appended to the previous block to form a Blockchain

A node is any computer on the Bitcoin network which by default has the exact copy of the entire blockchain data
A block is a record made up of a collection of transactions and meta-data grouped together as a single entity

A compendium of all these concepts and technologies that facilitate the execution of activities on the blockchain can be referred to as Bitcoin.

Quick note: Going forward, i will be referring to the bitcoin cryptocurrency as BTC for ease of identification and understanding and it's shorter to write.

📜 Bitcoin Wallets

Just like with conventional wallets, A Bitcoin wallet stores BTC you have ownership of. It is a single source of truth for determining your BTC balance and spending from the balance and also adding to the balance via a special set of alphanumeric characters called an Address. Lastly, a bitcoin wallet can either be a physical device like a USB drive, SSD, or HDD, or it can also be a computer program.

📜 Bitcoin Addresses

Let's quickly talk about hashing. Hashing is a cryptographic process of passing a set of data through a secure hash algorithm to produce an encrypted value called a Digest.

source: simplilearn

On a more technical level, a Bitcoin wallet is a database file that contains a set of digital keys mathematically related to each other. they are key pairs that serve as

A public id that serves as what you would call a bank account number in the centralized space. it is called a Public key and is used to receive and send BTC on the network
A private ID (Private Key) which is more or less a PIN. It is a secret set of alphanumeric characters that is used to generate digital signatures for the sake of transaction validation.

Quick Note: the public/private key value pairs are generated through a cryptographic algorithm called an Elliptic curve cryptographic function. if you care to read more about it and lose a little bit of your sanity then check out Elliptic Curve Cryptography Explained.

Bitcoin Addresses are generated from a public key via a one-way cryptographic hashing algorithm and are about 26 to 35 characters long.

The algorithms mentioned above leverages on double-hashing:

Secure Hash Algorithm (SHA256)
RACE Integrity Primitives Evaluation Message Digest (RIPEMD160)

And the final digest is passed through Base58Check encoding to improve the human readability of the final address

Mathematically:

// one-way cryptographic hashing algorithm

Digest = SHA256(PublicKey)
DigestTwo = RIPEMD160(Digest)
finalAddress = Base58Check(DigestTwo) //encoding

Now that we have gone over how to create a Bitcoin address, below is are the different types of Bitcoin address:

Legacy (P2PKH)
Nested SigWit (P2SH)
Native SegWit (Bech32)
Taproot (P2TR)

📜 Conclusion

This is the end of the first part of the series, I hope you were able to gain some surface-level understanding of Bitcoin at least. In the next part, we'll dive deep into the different types of Bitcoin addresses mentioned above. Thank you.

DEV Community: Abba Adamu

Bitcoin - A dummy's technical guide to the bitcoin ecosystem part 2 (Addresses)

📜 Objective

📜 Introduction

📜 Understanding Bitcoin addresses

📜 Why do we have different Bitcoin address types?

📜 Legacy Address a.k.a Pay-to-Public-Key-Hash (P2PKH)

📜 Nested SegWit a.k.a Pay-to-Script-Hash (P2SH)

📜 Native SegWit a.k.a pay-to-witness-public-key-hash (Bech32)

📜 Taproot a.k.a Pay-to-Taproot (P2TR)

📜 Conclusion

📜 Useful links

Simulate your first Lightning transaction on the Bitcoin regtest network Part 1 (MacOS)

Objective

📜 Introduction

📜 Requirements

Simulate your first Lightning transaction on the Bitcoin regtest network Part 3 (MacOS)

📜Objective

📜 Introduction

Prerequisites

📜 Connect the lightning nodes to form a peer

📜 Open a payment channel between lnd1 and lnd2 nodes

📜 Mine some blocks to increase the confirmations for the Channel opening transaction

📜 Check the list of channels

📜 Create an invoice on lnd2

📜 Pay or satisfy the invoice created by lnd2 via lnd1

📜 Close the payment channel, kill both Bitcoin and lightning daemons

📜 Conclusion

Simulate your first Lightning transaction on the Bitcoin regtest network Part 2 (MacOS)

📜Objective

📜 Introduction

📜 Some boring but very important stuff to get us started

⚙️ Confirming our Bitcoin environment and spinning up a Bitcoin daemon

📜 Spin up a Bitcoin network (regtest network)

📜 Ensure we are on the regtest network

📜 Prepare the first lightning node aka lnd1 for some action

📜 Prepare the second lightning node aka lnd2 for some action

📜 Conclusion

📜 Useful links

Bitcoin - A dummy's technical guide to the bitcoin ecosystem part 1

📜Objective

📜 Introduction

📜 What is a cryptocurrency

📜 What is bitcoin (BTC))

📜 A definition of sorts

📜 What is a cryptocurrency exchange?

📜 The difference between Bitcoin and bitcoin

📜 Bitcoin Wallets

📜 Bitcoin Addresses

📜 Conclusion

📜 Useful links

📜 Open a payment channel between `lnd1` and `lnd2` nodes

📜 Create an invoice on `lnd2`

📜 Pay or satisfy the invoice created by `lnd2` via `lnd1`

📜 Prepare the first lightning node aka `lnd1` for some action

📜 Prepare the second lightning node aka `lnd2` for some action

📜 What is `bitcoin (BTC))`

📜 The difference between `Bitcoin` and `bitcoin`