Published on: 2021-06-29T15:27:52+00:00
The Lightning Network has adopted a modified version of the interactive transaction protocol used by the Discreet Log Contracts (DLC) team. This modification allows for batching to transmit input/output sets, enabling multiparty coinjoins on lightning and dual-funded opens with many peers contributing UTXOs and outputs. The interactive transaction protocol provides flexibility and plausible deniability regarding any UTXOs sent to peers.However, there is a tradeoff between succinctness and adding rounds of communication, which can impact performance and uptime requirements. UTXO privacy is important, but not associating one's identity with a node in published channels is more critical. While Taproot scripts may help address some issues, purely on-chain analysis will still be hindered.Although there have been positive reviews of the Lightning Network's dual-funding proposal, there are significant objections to the protocol. One concern is the need to share UTXOs with a channel peer. However, this is limited to the UTXOs used for funding transactions, and all UTXOs in the current opening protocol are already publicly associated with a single party. The interactive transaction protocol also makes it difficult for outside observers to determine which UTXOs belong to whom.Another objection is that an active prober can use the interactive transaction protocol to discover a wallet's entire UTXO set. To counter this, the PoDLE protocol has been employed to make the discovery more costly for potential attackers. Reusing the same UTXO across every open attempt and being selective about which peers liquidity is offered to can also slow down this type of attack.Modifications to the interactive transaction protocol, such as batching, allow for multiparty coinjoins and transmission of input/output sets. This offers plausible deniability regarding UTXOs sent to any peer. While UTXO privacy is important, not associating identity with a Lightning node in published channels is crucial. The progress of Taproot scripts in addressing these issues is uncertain, but it is still best practice to avoid tying one's identity to their Lightning node and reconsider the source of funds used for announced channel opens.
Updated on: 2023-07-31T23:29:23.719177+00:00