<p>I'll address your question from a higher level, but I hope my answer is illuminating. </p>

<p>It seems that much of your thinking maps the opening of a LN channel onto some type of common payment situation, for example: <em>"I make payments to the utility company, so I need to open a channel with them"</em>.</p>

<p>A key function of the LN is that it is able to route payments through the network, meaning a participant doesn't need a direct channel with their counterparty. So as a user, I should only really care about <em>"what is my capacity to make, and to accept payments on the LN?"</em>. In a highly connected network, it doesn't really matter <em>who</em> I've opened a channel with, it just matters that my funds are available. </p>

<blockquote>
  <p>...how I'd go about sending a payment to a hypothetical (mythical?) cutting edge utility company</p>
</blockquote>

<p>Every month, you would need enough spending capacity on the LN to submit your payment (and the utility company would need enough receiving capacity). You are both incentivized to maintain these respective capacities, and it is worth noting that opening a channel directly between each other does help to do this (but it is not the only way).  </p>

<blockquote>
  <p>...if you can explain what's up with the common 'Alice and Bob both add 1/2 BTC to a channel' example. I can't fathom what the real world transaction model that is supposed to represent.</p>
</blockquote>

<p>In light of what I said above, this example is simply an economic use of block space. Alice and Bob would both like to gain 0.5 BTC of spending capacity on the network, and by working together to open a channel, they will also both gain 0.5 BTC of receiving capacity. Their goal isn't necessarily to spend money back and forth between themselves, it is just to have funds available to spend on the network.</p>

<blockquote>
  <p>It seems that the expectation is that there will be an intermediary that I keep a large amount of funds with, and I would then use that central channel as a hub... true?</p>
</blockquote>

<p>I don't believe this is necessarily true, though I think it is easier to imagine the function of a hub than of a highly connected graph. The network is still young and the only real way to measure its topography will be to watch it grow and evolve.</p>

CC BY-SA 4.0
2018-10-09T20:37:22.047Z
2018-10-09T20:37:22.047Z
chytrik
<p>when reading your question - for the third time now :-) - I always come to the conclusion, that payment channels (with locktime, or nowadays with CLTV/CSV) would be the solution. They are used for quite some time, and they are uni-directional. The typical publisher model. You order a newspaper, send money, and get the newspaper for the next year. But two things against it: one would also have to do a deposit, and you are asking especially for Lightning...</p>

<blockquote>
  <p>what's up with the common 'Alice and Bob both add 1/2 BTC to a
  channel' example?</p>
</blockquote>

<p>the real world model might not be the one that you expect for a retail user, but gives a clue: Andreas describes in his book "Mastering Bitcoin" a scenario, where two exchanges manage funds, one in India, the other in USA. Both have users that transact somehow buying funds in different countries. So they want to transfer certain amounts cross border, and one exchange is Alice, the other Bob. Another business example I have is in my own environment: I am having a partner in Africa, and I am based in Europe. There are many people coming from Africa to buy goods in Europe, sell it in Africa, convert the money back to Euros, and restart the business travel. With more and more exchanges in Africa I am hoping that we can get rid of the FIAT exchanges (ten years down the road...) It is too expensive, even latest bitcoin fees in December were cheaper. 
Anyhow, at the same time there are many people from Africa working in Europe, sending money "home". So these funds cross each other: business from Africa to Europe, and money for the families from Europe to Africa (and the FIAT world earns fees twice). The payment channel is supporting this in an optimal way. </p>

<blockquote>
  <p>I'm looking for an answer that explains how I'd go about sending a
  payment to a hypothetical (mythical?) cutting edge utility company:</p>
</blockquote>

<p>Well, as this is all too new, maybe it still needs some time. But in bitcointalk there are some "utility" discussions:</p>

<p>opening <a href="https://bitcointalk.org/index.php?topic=1848861.msg18444685#msg18444685" rel="nofollow noreferrer">one side channel in Lightning</a>: </p>

<p>a long discussion of use cases (<a href="https://bitcointalk.org/index.php?topic=1848861.0" rel="nofollow noreferrer">car dealer and salary</a>):</p>

<p>and some more (<a href="https://bitcointalk.org/index.php?topic=2293566.0" rel="nofollow noreferrer">grocery and landlord</a>).</p>

<blockquote>
  <p>It seems that the expectation is that there will be an intermediary
  that I keep a large amount of funds with, and I would then use that
  central channel as a hub... true?</p>
</blockquote>

<p>At the current point in time, from what I have read and understood (with my little bit of imagination), yes.</p>

CC BY-SA 3.0
2018-03-16T16:57:05.343Z
2018-03-16T16:57:05.343Z
pebwindkraft
<p>I see a number of deep theory questions and highly detailed answers for questions about fraud, opening channels, etc. What I cannot find is a simple explanation of how one would go about doing something as mundane as making a monthly payment. </p>

<p>The concept of opening a channel with a balance seems to imply that any amount I'd want to send will have to be allocated up front. Is there no way to add funds periodically, as one would normally do for paying bills? The existing answer <a href="https://bitcoin.stackexchange.com/questions/57897/is-it-possible-to-add-funds-to-an-already-open-lightning-network-channel" title="Here">here</a> is hypothetical and seems lacking. It seems there are a some still quite shallow proposals, if there's any validity to the link in the comment on the question...</p>

<p>It seems that the expectation is that there will be an intermediary that I keep a large amount of funds with, and I would then use that central channel as a hub... true?</p>

<p>Finally, bonus kudos if you can explain what's up with the common 'Alice and Bob both add 1/2 BTC to a channel' example. I can't fathom what the real world transaction model that is supposed to represent. I can't quite grasp when I would ever use a two sided account; my transactions almost always go one direction. I realize now that the current (or recent) Lightning implementation only funds from one source, but that example is so common that it wasn't until reading the answer <a href="https://bitcoin.stackexchange.com/questions/62729/clarification-of-lightning-network-example-putting-funds-into-lightning">here</a> that I realized this.</p>

<p>I'm looking for an answer that explains how I'd go about sending a payment to a hypothetical (mythical?) cutting edge utility company. I expect there are at least two answers - one where the utility company and I create a 'direct' channel, and another where I 'reuse' ('pay through') a channel I happen to have with a central hub. Any answer must assume I'm a normal person who can't pay more than one month at a time. </p>

<lightning-network>
Lightning: How would I make a monthly payment to a utility company, etc
ggranum
# Lightning: How would I make a monthly payment to a utility company, etc

(Asked by: username_0 on 2018-02-20)

I see a number of deep theory questions and highly detailed answers for questions about fraud, opening channels, etc. What I cannot find is a simple explanation of how one would go about doing something as mundane as making a monthly payment.

The concept of opening a channel with a balance seems to imply that any amount I'd want to send will have to be allocated up front. Is there no way to add funds periodically, as one would normally do for paying bills? The existing answer [here](https://bitcoin.stackexchange.com/questions/57897/is-it-possible-to-add-funds-to-an-already-open-lightning-network-channel "Here") is hypothetical and seems lacking. It seems there are a some still quite shallow proposals, if there's any validity to the link in the comment on the question...

It seems that the expectation is that there will be an intermediary that I keep a large amount of funds with, and I would then use that central channel as a hub... true?

Finally, bonus kudos if you can explain what's up with the common 'Alice and Bob both add 1/2 BTC to a channel' example. I can't fathom what the real world transaction model that is supposed to represent. I can't quite grasp when I would ever use a two sided account; my transactions almost always go one direction. I realize now that the current (or recent) Lightning implementation only funds from one source, but that example is so common that it wasn't until reading the answer [here](https://bitcoin.stackexchange.com/questions/62729/clarification-of-lightning-network-example-putting-funds-into-lightning) that I realized this.

I'm looking for an answer that explains how I'd go about sending a payment to a hypothetical (mythical?) cutting edge utility company. I expect there are at least two answers - one where the utility company and I create a 'direct' channel, and another where I 'reuse' ('pay through') a channel I happen to have with a central hub. Any answer must assume I'm a normal person who can't pay more than one month at a time.

**Tags:** lightning-network


---

## 2 answers

### Answer by username_1 on 2018-10-09. Score: 1

I'll address your question from a higher level, but I hope my answer is illuminating.

It seems that much of your thinking maps the opening of a LN channel onto some type of common payment situation, for example: *"I make payments to the utility company, so I need to open a channel with them"*.

A key function of the LN is that it is able to route payments through the network, meaning a participant doesn't need a direct channel with their counterparty. So as a user, I should only really care about *"what is my capacity to make, and to accept payments on the LN?"*. In a highly connected network, it doesn't really matter *who* I've opened a channel with, it just matters that my funds are available.

> ...how I'd go about sending a payment to a hypothetical (mythical?) cutting edge utility company

Every month, you would need enough spending capacity on the LN to submit your payment (and the utility company would need enough receiving capacity). You are both incentivized to maintain these respective capacities, and it is worth noting that opening a channel directly between each other does help to do this (but it is not the only way).

> ...if you can explain what's up with the common 'Alice and Bob both add 1/2 BTC to a channel' example. I can't fathom what the real world transaction model that is supposed to represent.

In light of what I said above, this example is simply an economic use of block space. Alice and Bob would both like to gain 0.5 BTC of spending capacity on the network, and by working together to open a channel, they will also both gain 0.5 BTC of receiving capacity. Their goal isn't necessarily to spend money back and forth between themselves, it is just to have funds available to spend on the network.

> It seems that the expectation is that there will be an intermediary that I keep a large amount of funds with, and I would then use that central channel as a hub... true?

I don't believe this is necessarily true, though I think it is easier to imagine the function of a hub than of a highly connected graph. The network is still young and the only real way to measure its topography will be to watch it grow and evolve.


---

### Answer by username_2 on 2018-03-16. Score: 1

when reading your question - for the third time now :-) - I always come to the conclusion, that payment channels (with locktime, or nowadays with CLTV/CSV) would be the solution. They are used for quite some time, and they are uni-directional. The typical publisher model. You order a newspaper, send money, and get the newspaper for the next year. But two things against it: one would also have to do a deposit, and you are asking especially for Lightning...

> what's up with the common 'Alice and Bob both add 1/2 BTC to a
> channel' example?

the real world model might not be the one that you expect for a retail user, but gives a clue: Andreas describes in his book "Mastering Bitcoin" a scenario, where two exchanges manage funds, one in India, the other in USA. Both have users that transact somehow buying funds in different countries. So they want to transfer certain amounts cross border, and one exchange is Alice, the other Bob. Another business example I have is in my own environment: I am having a partner in Africa, and I am based in Europe. There are many people coming from Africa to buy goods in Europe, sell it in Africa, convert the money back to Euros, and restart the business travel. With more and more exchanges in Africa I am hoping that we can get rid of the FIAT exchanges (ten years down the road...) It is too expensive, even latest bitcoin fees in December were cheaper.
Anyhow, at the same time there are many people from Africa working in Europe, sending money "home". So these funds cross each other: business from Africa to Europe, and money for the families from Europe to Africa (and the FIAT world earns fees twice). The payment channel is supporting this in an optimal way.

> I'm looking for an answer that explains how I'd go about sending a
> payment to a hypothetical (mythical?) cutting edge utility company:

Well, as this is all too new, maybe it still needs some time. But in bitcointalk there are some "utility" discussions:

opening [one side channel in Lightning](https://bitcointalk.org/index.php?topic=1848861.msg18444685#msg18444685):

a long discussion of use cases ([car dealer and salary](https://bitcointalk.org/index.php?topic=1848861.0)):

and some more ([grocery and landlord](https://bitcointalk.org/index.php?topic=2293566.0)).

> It seems that the expectation is that there will be an intermediary
> that I keep a large amount of funds with, and I would then use that
> central channel as a hub... true?

At the current point in time, from what I have read and understood (with my little bit of imagination), yes.


---

