The new Eltoo proposal helps to significantly reduce the amount of data to be stored and in addition providing a safety net for user’s cryptocurrency holdings.

The entire Bitcoin community has its eyes set on the Lightning Network development – a Bitcoin’s off-chain scalability solution the developers have been working very rigorously on for a long time. Since the beginning of 2018, there has been a significant push in the development of Lightning Network, however, professionals are now looking to restructure the technology.

Some of the developers working on this project like Lightning Labs co-founder ‘Laolu’ Osuntokun and Blockstream’s Christian Decker and Rusty Russell have published a new proposal called Eltoo that provides an alternative “simplified” way of performing off-chain transactions.

Although the existing development of the Lightning Network has provided a major boost to Bitcoin’s network capacity, it still requires users to store a significant amount of data which makes it difficult to download and run. The new Eltoo proposal helps to significantly reduce the amount of data to be stored and in addition, also provides a safety net for user’s cryptocurrency holdings.

Another existing issue with the huge data is that if the user broadcasts the old data accidentally, he/she might lose all of the money in an instant. Such data is referred to as the “toxic information”. To solve this, the Eltoo proposal will only store the most recent off-chain transaction data.

This helps to overcome the problem of “information asymmetry” which means that if anything happens to the device on which you’re running the lightning app, the user might possibly lose access to the entire history of data. I, n this regardBlockstream’s Christian Decker said:

“With eltoo, we reduce the risk of funds being swept away. We remove this toxic information.”

Decker has been quite eager to solve this issue as he has been a personal victim of this:

“This actually happened to me. I had an old lightning node on my laptop. I restored it. I didn’t know I didn’t have the newest state. The guy closed the connection because they knew it was an old state! Because he could steal it. Which he did, by the way.”

Decker also said that the proposed name ‘Eltoo’ is just a phonetic spelling of L2 that stands for layer-two. He also added that:

“Eltoo doesn’t aim to replace the entirety of the Lightning stack. Rather it is a drop-in replacement for the original update mechanism that maintains backward compatibility with the other parts of the stack.”

However, Decker has said that before the implementation of Eltoo, a minor change must be made to the Bitcoin’s architecture that includes introducing the “SIGHASH_NOINPUT” flag for signatures.

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