A joint study by two Hungarian universities, Eötvös University in Budapest, and Szèchenyi University in Gyor, in conjunction with the nation’s Institute for Computer Science and Control (SZTAKI) has turned up some, possibly damning, information about the Lightning network. The 21 page document released by SZTAKI finds Bitcoin’s second layer scaling solution ‘economically irrational’ and highlighted the payment network’s security flaws.
The Lightning Network is a second layer transaction processing platform which, working in tandem with the main chain, is designed to clear a large number of transactions, quickly and cheaply. Lightning payments were introduced to Bitcoin in an effort to scale the cryptocurrency’s transaction processing capabilities without changing too much of its original code. Researchers analyzed the off-chain processing platform on its promise of being a cheaper, more private, secure and fast alternative to on-chain transactions.
The team from Budapest and Gyor simulated Lightning Network traffic with the purpose of ascertaining whether or not the payment network was indeed, private secure, speedy and affordable. Their analysis only confirmed what various blogs and social media posts had already made public, as the researchers found that using the LN was “economically irrational for the majority of the large routing nodes who currently hold the network together.”
The research team concluded that fees would either have to increase (an eventuality they term ‘routers acting rationally’) or network usage would need to balloon, for the Lightning Network to be a viable scaling solution.
“Our simulator provided us with two main insights. First, the participation of most router nodes in LN is economically irrational with the present fee structure; however, signs of sustainability are seen with increased overall traffic volume over the network. By contrast, at the present level of usage, if routers start acting rationally, payment fees will rise significantly, which might harm one of LN’s core value propositions, namely,negligible fees. Second, the topological properties of LN make a considerable fraction of payments easily de-anonymizable. However, with the present fee structure, paths can be obfuscated by injecting extra hops.”
Privacy & Security
This marks the second study in two months, calling out the Lightening Network’s privacy and security shortcomings. Researchers found that, due to the Lightning Network’s small- world nature, there is statistical evidence that payment source and destination can still be “inferred” by a third party.
Last month a team of computer scientists from the Hebrew University of Jerusalem and the University of Vienna found an exploitable weakness in the Lightning Network that could lead to a “Denial-of-Service attack. This followed a public disclosure, by the Lightening Network, of a security risk, following months of urging users to upgrade.
“This is also a great time to remind folks that we have limits in place to mitigate widespread funds loss at this early stage. There will be bugs. Don’t put more money on Lightning than you’re willing to lose! We recommend updating with all versions, [as] there are always improvements and fixes,” – Lightening Network in a tweet back in September.
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