Bolt is a new model which utilizes the latest technology advancement to accomplish a similar set of goals as the Lightning Network and of all this is done with utter anonymity. With BOLT the idea of colluding is dead in the water as. Multiple payments made on the same channel cannot be linked together with the help of BOLT. Payments usually take a millisecond and more importantly they do not require block confirmation. What a merchant usually gets to know that he is paid on some sort of an open channel. Payments are carried out via third parties which furthermore avoids the need for a merchant and a customer to have a direct channel and all of this is done by maintaining the privacy against malicious third parties and by keeping the participants anonymous and the best part is by hiding the transferred value.
These channels must be funded with private fund so that the malicious parties won’t be able to violate the privacy by forcing a channel closure.
In simpler terms, let’s consider me as an end-user. And I as an end user would totally be anonymous with respect to all of the other individuals who are connected to the same intermediary. This isn’t as important as it should be in case of a perfectly Decentralized payment but when you consider the larger and centralised intermediary hubs, BOLT is very much useful to strong arm your privacy.
Problem with the Blockchain:
The Blockchain based cryptocurrencies record every single transaction ever made in the digital public ledger aka the Blockchain. The advantage of Blockchain is to eliminate the need for trusted parties. When you’re recording every single transaction in the Blockchain, it has serious privacy, scalability and latency issues. There is always the need of having enough space to record each and every transaction in the Blockchain. And when the transaction is recorded in a block, it takes minutes, and yes, the recording is obviously public in order to give people your whereabouts and what you’re up to in a Blockchain.
BOLT PRIVATE PAYMENT CHANNELS:
BOLT eliminates the link between a channel and payments. This means that a person’s payments are hidden within the set of all payments made to a particular recipient.
BOLT has are two designed protocols:
- The first part of the protocol is non-interactive. This protocol allows the payment from one person to the other.
- The second protocol allows the bidirectional payment of arbitrary values and this protocol requires interaction.
Bidirectional Payment Channels:
Both BOLT and Lightning Network enable cheap and fast transactions by using bidirectional payment channels.
What is a Payment Channel?
A payment channel is a simple connection between two parties which is used for the unlimited trustless transaction. In a payment channel, only the first and last of those transactions are posted on the Blockchain. In Bidirectional channels, money can be sent from either of the parties in a particular channel or to some other channel, one way or another.
Bidirectional Payment concept becomes more powerful when multi-party payment channels come into action. For Example, I have a payment channel open with a person named ‘X’ and ‘X’ has a payment channel open with ‘Y’. With the help of multi-party payment channels, I don’t have to open a channel with ‘Y’ to send the money rather I can send the payment to ‘X’ who in turn will send the same amount to ‘Y’ instantly.
What exactly the theory suggests is that Bidirectional Payment Channels is a universal peer-to-peer payment network of nodes where anyone connected to the network can transfer money to anybody else in an instantaneous, cheap and scalable manner.
How BOLT Works?
Much of the security in BOLT derives from the same game-theoretic incentives which are used by the Lightning Network. Other than this BOLT is comprised of two additional advanced cryptographic techniques to maximise privacy:
- Blind Signatures: Blind Signature enables a party to sign an encrypted data cryptographically without the need of seeing the underlying data.
- Zero-Knowledge Proofs: It enables a party to prove statements about the encrypted data mathematically without even revealing anything regarding the underlying information. A BOLT user sends zero-knowledge proofs about current balance and their identity without revealing either piece of information.
BOLT can be implemented by any Cryptocurrency which satisfies the basic requirements of BOLT implementation. Bolt is one big step closer to realising and implementing the original dream of a censorship-resistant, scalable and most importantly a trustless global currency. The Cryptocurrency industry is very young, and there is a chance that BOLT might just be the next big revolution and the solution we need because Cryptocurrency revolution begins and ends with the technological innovation.