Published on: 2016-07-20T00:57:30+00:00
The lightning network is a topic of discussion in the Bitcoin community. It allows for immediate use of funds while they are "pending settlement to the blockchain". An extension protocol has been proposed to split funding transactions and pay some of it to a given bitcoin address. However, it is noted that if Alice only has one channel with Bob, Bob can see all the amounts Alice spends. Traffic analysis, even when encrypted, can be powerful. The Lightning Network service is expected to grow slowly, similar to Bitcoin, with a possible killer app to accelerate its growth.In an email conversation, Ron OHara claimed that with Bitcoin, it is not "Alice transacting with Bob", but rather Address(1) transacting with Address(2). However, this claim is false as addresses only receive and never send. At a high level, two wallets are involved in each interaction, regardless of address reuse. Luke adds that at a low level, the interaction could involve different keys if the output from the initial interaction is spent.The conversation revolves around the limitations of payment channels and the potential for optimization with the Lightning Network (LN). Rusty Russell explains that LN allows for trustlessly chaining channels, enabling Alice to pay Carol via Bob. Ron OHara questions the volume of transactions per user needed to justify reserving funds and expresses concerns about the vulnerability of long-running channels to traffic analysis. Rusty suggests having three channels to increase system robustness and spread information around. Ron acknowledges that technical issues can be addressed but is more concerned about the bootstrap problem that LN faces. The conversation ends with a quote from Arthur C. Clarke.The author asks about optimizing transactions on the Lightning Network for frequent interactions between Alice and Bob. The response explains that simple payment channels already exist for this purpose, but LN allows for trustlessly chaining channels. However, if the interval between interactions is a month and Alice purchases from the same shops during that period, merchants may not be happy with the funds pending inside the LN for up to a month. The author also raises concerns about address reuse and traffic analysis, noting that long-running channels are vulnerable. It is suggested that having three channels can improve system robustness.The discussion in the LN whitepaper and other sources focuses on optimizing multiple interactions between Alice and Bob to a single settlement on the blockchain. However, it may not always be possible to optimize transactions for cases like Point of Sale where multiple entities are involved. Bitcoin transactions involve addresses rather than individuals, making optimization challenging if recommended practices of address reuse are followed. Long-running channels are also highlighted as being less secure than native Bitcoin transactions due to traffic analysis vulnerabilities. Additionally, the author expresses concerns about merchants being unhappy with pending funds inside LN that may take a significant amount of time to settle.
Updated on: 2023-07-31T19:01:58.472849+00:00