alt Hacker News> And you DO transfer bitcoin.
No, Layer-2 systems only transfer cryptographically signed IOUs between nodes.
Settlement only happens when these IOUs are cashed out, and to cash out you need a transaction in the blockchain layer, so the point about latency still stands.
Replies
It is splitting words. There is a settlement layer in lightning, which is presenting the preimage and unpeeling the onion HLTCs in reverse order. This happens at the latency of the network path, so usually less than a second. Bitcoin settling is usually tied to confirmation in the block, which lasts ~10minutes. Lightning might be IOUs, but ones that are fungible themselves and not tied to a specific debtor. Actual lightning-to-bitcoin cashout would probably not happen for everyday use, or at least not more often than you change bankaccounts in todays terms.
That's intellectually dishonest. It's like saying wire transfers or card payments are only valid after interbank settlements are finalized.
Bitcoin Lightning is cryptographically designed to be valid even if it's not yet settled on the main layer. It provides cryptographically sound mechanisms to overrule anyone that tries to "cheat". There is no mathematical way to cancel or double spend it, just like your dollars are valid when the transaction is committed in your bank's database although the money still technically hasn't left the other bank.
THis is the issue, until its settled in the chain, then you are down to trusting the 2nd layer.
Anything offchain has a whole bunch of issues that are either naively or deliberately obscured by the fact that it _eventually_ writes to the blockchain. The exchanges that offer instant settlement are circumventing trust by doing the settlement for you. You get speed, but not security that they have done what they have said they have.
It is as much an IOU as the US Dollar was pre-1971. That is a pretty good image for Lightning/Bitcoins relationship. Lightning is the dollar with a guarantee that you can convert it to gold anytime you like by presenting it at the central bank. Very few people ever converted their USD to the underlying gold as a settlement transaction. The difference with lightning is, the government can't just rug-pull you and stop exchanging those paper bill IOUs - it is cryptograhpically secured that you can always convert to bitcoin. Since no one would consider exchaging dollars as settling in gold, lightning settlement is not tied to on-chain transactions.