Whenever you first create the channel, the very first thing Hitesh and Irene do is signal the preliminary commitments, which assigns the preliminary steadiness to themselves. That is what known as the refund, as a result of if one of many events determine to not proceed, the cash returns to the house owners. This transaction is a traditional dedication transaction however is created as a result of if not, the funds could possibly be locked endlessly on a multisig if one of many events of the channel disappears!
First two examples
The primary two examples are dedication transactions created. Every consumer creates one dedication transaction with two outputs. In these, each Hitesh and Irene have two outputs:
- The primary output is a cost to the opposite individual of the preliminary
steadiness (5 BTC). - The second output is a cost to the identical individual making the
dedication however with alocktimeof1000 blocks. (Thelocktime goesthere, not within the refund!)
This dedication shouldn’t be broadcasted, every one of many events has his personal model. Every one of many events at any second can signal it and broadcast it. In that case the opposite individual would obtain the 5 BTC immediately and the individual accountable for the printed should wait1000 blocks.
Word that this dedication transactions are incomplete because the penalty mechanism is lacking in case some get together tries to cheat. Within the guide they present this uncompleted model to present an thought of the way it seems
Third instance
This final instance reveals how one can create an actual dedication transaction with the penalty mechanism included.
It provides a situation which permits a consumer to retrieve the funds of the second output if it has the revocation non-public key. The revocation secret is a key which each events can calculate the general public key, however they will solely get half of the non-public key. So that they solely have half of the non-public key. If at any second, one of many two customers has the 2 halfs of the non-public key, it might declare the funds within the second output.
If the channel state is up to date and a brand new dedication transaction is created, they trade their half of the revocation non-public key. This offers them the safety that if the opposite individual cheats and broadcast an previous dedication transaction, the sufferer will have the ability to declare the opposite individual the funds as a punishment.
Think about Hitesh tries to cheat; since Irene can declare his 5 BTC immediately (output 1), and Hitesh has to attend 1000 blocks to get the 5 BTC, Irene can declare Hitesh cash as she has the complete revocation non-public key (that is the brand new situation we added within the third instance).
Word that if Irene would not declare the funds earlier than 1000 blocks Hitesh will have the ability to proceed and declare himself the cash.
Abstract
In order a abstract, dedication transactions seem like the third instance because the penalty mechanism is required. Refund transaction is simply the primary dedication transaction that simply returns the funds to the customers. The penalty mechanism can be wanted there as a result of in the event you do not add it you can cheat and steal cash by broadcasting the refund transaction sooner or later when the channel state has superior.
