Lightning: The Ring of Fire


The Ring of Fire; a circle of payment channels, where you can perform a balancing act at the touch of a button. What sounds like a circus show is the new trend among participants in the Lightning network. What is it exactly, and what can you do with it?

What is a Ring of Fire?

To understand why a Ring of Fire is useful, we need to have some basic knowledge of the Lightning Network. The Lightning Network is a second-tier payment protocol designed to scale the number of possible Bitcoin payments. Payments between nodes on the Lightning Network are made possible by so-called ?????payment channels?????. These payment channels are in fact multi-sig wallets in which the participating nodes deposit a certain amount of bitcoin. Only the transactions that need to be done for opening and closing such a payment channel are included in the bitcoin blockchain. All payments in between (state-changes) are only registered by the two connected nodes.

While this sounds good in theory, it led to a problem in practice. Channels are generally funded from one side when they are opened (the side of the node that initiates the channel). This means that when opening a channel, this node has only local capacity. As a result, a node can initially only send payments, and not receive them. To receive transactions, you need nodes that open a channel to you. That is easier said than done. How do you get other nodes to open a channel for you? This is even more difficult for new nodes that are not yet well connected to the rest of the network, or have just come to see the wonderful world of Lightning.

Well-connected nodes, with high uptime and well-funded channels, act as a magnet for other nodes. Node managers will easily find these high-end nodes on sites like 1ML and then open a channel. As a result, the nodes, which were already well connected up to that point, get extra liquidity. While it is logical that people like to be connected to a node with many connections, it is also logical that no one seeks out a connection with a dead end. This is therefore a self-reinforcing effect, in which increasingly larger nodes are created.

“If the mountain won’t come to Muhammad, then Muhammad must come to the mountain.”

As a new node looking for the incoming capacity to receive payments, you must therefore actively look for other nodes that want to open a channel to you. For a while this was mainly done by knowing the right people. Being active in Lightning Telegram groups often resulted in mutual agreements to both open a channel to each other. While this approach works, it also has some drawbacks. The process (if you can call it that) is rather ad-hoc, depends on a high level of trust and tends to centralize around the large, well-connected nodes. The network started to look like a centralized network, where in theory we would prefer to create a decentralized or even a distributed network.

To address this issue, two developers, SoulExporter and Czino, documented a structured process to: ?????Strengthen and improve collaboration, through a ring of nodes concept. It serves as a template to bring node managers together and connect each other.????? They called this ring of nodes “The Ring of Fire”.

How does it work?

The benefits should be obvious: setting up such Rings of Fire creates a fraternizing community, an expanding network and more liquidity. But how does it work? Anyone who wants to set up a node and is looking for more liquidity, and therefore payment channels, united in Telegram groups or on websites where the coordination of the rings to be formed takes place.

These meeting places function as a kind of market square, where supply and demand are matched. Two variables are particularly important here; the size of the ring, i.e. how many participants will form a circle together, and the size of the payment channels. These variables are predetermined so that everyone can choose what kind of ring they would like to participate in.

When the places are filled, and everyone will use the same variables, the process of forming the ring can start. With larger rings, the different parts of the circle are often cut into pieces, with a team captain first ensuring that it is clear to everyone what needs to be done. Lightning is still in the experimental phase, and there are a lot of participants who are just getting started with Lightning, or even for the first time. It is important for everyone that everyone is well aware of the steps to be taken. That is of course also a big part of the satisfaction, with everyone helping each other to achieve the greater goal, a balanced Ring Of Fire.

When the circle has been drawn on paper, and it is clear who will have to open a channel to whom, the payment channels can be opened. Visualize that each participant has been given a number. Twenty participants were therefore handed out twenty numbers. Number one opens a channel with number two, two with three, and so on until number twenty can close the ring by opening a channel to number 1. Et voila, the ring is now a fact! However, it is not yet ablaze.

To balance

As we mentioned earlier, the problem was when opening a channel that initially you can only send, not receive. Now that the ring is formed you can both send and receive. However, it is currently only a roundabout, with payments only going in one direction. If number two in the ring wants to receive a payment from number three, all other nodes must be used. The payment must be sent through this one-way street, via nodes four, five, six and so on, until it reaches node two. That is far from ideal, because it also means that all nodes must be accessible and available at the time of payment.

To exclude a single point-of-failure , it can be ensured that the channels are all balanced. In theory, all nodes could, in good faith, forward half of their open channel to the next node. This with the good hope that they will eventually receive it back from need before them.

This of course conflicts with the aim to be able to make trustless payments. Therefore, there is another solution to balance the ring; the circular balance . With the circular balance you can send a payment to yourself. For this you use other nodes in the network, which changes the local and remote balances of channels. For the circular balance, you must indicate how many satoshis should be sent, and from which channel they should ultimately be received back. For this it is important that the right path is chosen, with all nodes from the ring as intermediate stations. With payment, often half the capacity of the channel, flying all over the ring, all participants have seen the channels balanced with confidence. A kind of ignition of the Olympic flame, if I do say so myself! As a result, all nodes can now send and receive payments through the nodes on both sides of the loop.

Knowing more? The whole process and the experiences of how a community formed a ring of 65 nodes are described on Satoshi Radio’s website.

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