Published on: 2018-05-22T22:45:38+00:00
In a recent discussion on the Lightning-dev thread, a user named Corné Plooy brought up the topic of decentralized crypto/crypto exchange, specifically focusing on atomic swaps on the Lightning network. The main issue identified by Plooy is the potential for participants to delay transactions in order to speculate on exchange rate changes. To address this issue, Plooy proposed two approaches.The first approach involves using a latency monitor service to collect transaction data, which could then be used to build a reputation system for market participants. However, Plooy found this approach problematic when it comes to dealing with reputation in a community where pseudonyms can be easily created.Instead, Plooy favors the second approach, which involves delegating the execution of Lightning transactions to a trusted third party. This eliminates the need for trust between the trading parties, as they only need to trust the third party to not cooperate with the other party to perform a delay attack. While this design is not completely trust-free, it offers several advantages. For example, customers can remain anonymous, and the trusted third party cannot steal their funds. Additionally, the provider doesn't know which asset is being traded.It's worth noting that decentralized Lightning-based exchanges may not be suitable for high-frequency or high-volume needs. However, they could serve the needs of casual users who are already on the Lightning network. One advantage of these decentralized exchanges is that they eliminate the need for exchanges that hold large amounts of stored crypto assets, which are often targeted by hackers.Plooy included links to their proposals for both approaches to prevent abuse in a Lightning-based peer-to-peer exchange. In response to Plooy's post, another user named ZmnSCPxj pointed out that exchange delay abuse and the loop attack share the same attack vector, suggesting that mitigations for one could also apply to the other.Overall, the author of the post has been considering the implementation of a decentralized crypto/crypto exchange on the Lightning network through atomic swaps. While there are challenges to address, such as delaying transactions for speculation, the proposed approaches offer potential solutions and advantages over traditional exchanges.
Updated on: 2023-07-31T20:16:58.733315+00:00