Bitcoin transactions faster and cheaper? Check. But at what cost?

For bitcoin users, many of whom have been drawn to cryptocurrency for its promise of financial sovereignty, bitcoin is still synonymous with privacy. But the gap between vision and reality, in which user transactions must now be published in a globally distributed book, has long been one of the biggest controversial topics. of technology.

“Bitcoin, that’s Twitter for your bank account, everything is public for everyone,” CoinDesk told Ian Miers, the co-founder of the zcash cryptocurrency focused on privacy.

By contrast, when Bitcoin users are approaching a whole new way of sending transactions, fueled by an innovation called Lighting Network, there is growing concern that confidentiality could to degrade its already imperfect state.

On the surface, the idea may seem promising – because Lightning payments occur off-line, the information is not included in the blockchain that all nodes store.

But if there is no Lightning registry so to speak, the payments in the system are still broadcast across the network nodes. Essentially, to ensure that routing is always available, those who use Lightning channels need to trust other network users to facilitate relay transactions.

Conceptually, this means that participants in the system could benefit from a transaction, or even sell that information to governments or advertisers. This is a risk that worsens if the network becomes centralized in a hub-and-spoke structure, where hubs are large, well-known and often used entities.

“Lightning will probably not improve privacy, it could well make it worse from the average consumer’s point of view,” added Miers.

And as many, more speculative concerns surrounding the next technology, the risk to the privacy of the user may not be obvious until the network is deployed – an uncertainty that combined with a wave of effort for developers Lightning has sparked shared feelings about the future of private transactions on bitcoins.

According to privacy researcher Kristov Atlas, in the worst case, privacy abusers could “flourish” on platforms by “vampirically fueling” data as he wrote. in a blog post.

However, the next version of Lightning includes privacy features, and there is reason to believe that developers are at least making progress on the problem.


To date, Lightning’s most advanced privacy feature is called “Onion Routing” and is part of the Lightning Technology Bases (BOLT), a series of protocols that ensure interoperability multiple iterations. ]

In onion routing, payments are transmitted via multiple channels, and only the minimum of information about that payment is exposed.

For example, upon receipt of an encrypted payment, a node can only know where this payment comes from and to which node this payment should be relayed.

According to Olaoluwa Osuntokun, a leading lightning development figure who first suggested the scheme on the developers’ mailing list, the importance of this is that nodes can not be selective about payments that they are ready to take.

“Nodes should not be able to arbitrarily censor payments or blacklist certain destinations in the channel chart,” said Osuntokun.

Often compared to the Tor network for its use of onion routing, Lightning has sometimes been celebrated as a darknet for bitcoin payments – however, it is comparatively untested, and could cope with some of Tor’s native problems as well.

“Similar to Tor, there are known possibilities of temporal leaks, as well as unknown active attacks that may be viable,” said Osuntokun.

And according to some, there are ways in which onion routing could be manipulated, leading to the loss of privacy, especially in an older Lightning network.

For example, the last node of a route, as well as the one that sent this payment, will know the transaction information, and theoretically, the nodes could hear to break the confidentiality, restoring each layer payment to create a complete transaction. picture.

On top of that, there is the risk of a “global adversary capable of instantly monitoring all the channels on the network”, which the current privacy protection protocol does not address continued Osuntokun


Fixed identifiers

And there are still other flaws in the privacy on Lightning today.

For example, Lightning payments currently receive a fixed identifier that is repeated all along the route. “It means that if an opponent has two non-contiguous nodes on the road, then they can trivially tie a cash flow,” Osuntokun said.

That said, Osuntokun assured that there were ways to correct that in the future.

For example, if the Schnorr signatures, a scaling method that works by aggregating public keys, are adopted in bitcoin, this could fix this problem in a “simple and attractive” way, according to Osuntokun .

In addition, there are other “heavier solutions”, such as the use of zero knowledge to encrypt payments. However, since this encryption device is heavy, it will significantly increase the amount of data to be sent to make a payment, Osuntokun said.

According to Osuntokun, the “lowest fruit” is to obscure this payment identifier with random numbers when payments pass through the network.

Hub and Radius

Other even more speculative risks exist, but according to Miers, everything depends on the structure that the Lightning network will take.

“Some people think that the amount of money you need to lock yourself in a channel and the costs of operating the nodes will inevitably lead to centralization,” Miers said. “And then there is clearly no intimacy.”

As onion routing works by passing payments across multiple nodes, in the case of a highly centralized network, active nodes could have perfect visibility of payments.

However, Blocksteam engineer Christian Decker told CoinDesk that development teams are creating “countermeasures” against this risk of centralization.

Programming the system to open channels at random, Lightning “tries to avoid having hubs capable of observing traffic,” says Decker, who has the advantage of ” strengthen [ing] the network as a whole against points of failure. “

Decker said that this randomness could be extended to the way roads are formed on the network, making payment paths less predictable, but the potential increases costs.

Other researchers maintain the risk of maintaining a high-speed node that will prevent the formation of centralized hubs.

Miers concluded:

“We’ll see which one will actually happen.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which holds an interest in Zcash Company, the for-profit entity that develops the zcash protocol .

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