Principle Limitations to the reliability of the Lightning Network Protocol

Summary:

A Lightning Network developer named René Pickhardt has written an article titled "Price of Anarchy from selfish routing strategies on the Lightning Network". In the article, he discusses how the selfish behavior of nodes sending Bitcoin over the Lightning Network may lead to higher drain on channels which in turn is expected to result in higher depletion and failure rates for payments on the network. He states that all observations have been derived purely by looking at statistical measures and computations on the data that the Gossip Protocol and Bitcoin Network provides about the topology of the Lightning Network. No probing or empirical experiments had to be conducted to derive these theoretical results. Pickhardt hopes that the described effects won't be too strong for the expected traffic and usage of the network so that the technology will work properly at the required scale. He also invites thoughts, feedback, comments, and questions from his fellow developers. In response to Pickhardt's article, Gregorio writes a letter to him, referencing a paper he wrote a few years ago titled "Modeling a Steady-State Lightning Network Economy". The paper discusses an idealized scenario in which the Lightning Network (or any similar payment network) has scaled to the size and volume of a self-sustained economy, meaning that the number of on-chain transactions - including channel opening and closing - has become negligible when compared to the number of off-chain transactions, and payments continuously flow across a network with relatively stable topology. Gregorio notes that there is a link between the idea of "drain" Pickhardt defined and the concept of "demand imbalance" in his paper. He argues that in such a scenario, in a network of n connected nodes, there is a tendency towards a state where exactly n-1 channels have perfectly balanced flows in the two directions ("self-balancing" channels), while all other channels are either unused, or have a permanent tendency towards imbalance: the channel balance accumulates at one end and the channel is only intermittently available in one direction ("stuttering" channels). He notes that the "self-balancing" channels form a spanning tree of the network graph, which he calls the "core spanning tree" of the payment network. Gregorio also tries to derive some practical lessons from this idealized scenario, hopefully providing some useful insight to node operators of the current (embryonic) Lightning Network. He wonders if rebalancing and fee management tools are really enough to contrast the tendency toward imbalance. If not, it would be appropriate to consider other strategies to “work with the imbalances” instead of fighting them. He refers, for example, to efficient low-latency mechanisms to signal when a channel becomes unusable in one direction, in order to limit the failure rate, together with a general robustness of the network against a pervasive and high-volume flow of information about channels that switch from being available to not available and vice versa (or that switch between low fees and high fees).

Updated on: 2023-06-03T08:46:14.201646+00:00