TL;DR: The Institute for Computer Science and Control (SZTAKI) in Hungary released, A Cryptoeconomic Traffic Analysis of Bitcoin’s Lightning Network. The 21-page study examined the second layer solution to the notorious scaling issues plaguing the world’s most popular cryptocurrency, BTC. They concluded the Lightning Network (LN) is economically irrational and has privacy shortcomings. It’s the latest learned appraisal of LN, which for the last five years has been about 18 months away from awing the ecosystem, according to proponents.
Lightning Network is Economically Irrational and has Privacy Shortcomings
The long-promised scaling solution for BTC known as Lightning Network was recently given more scrutiny by computer scientists from two Hungarian universities. They examined so-called off-chain payment channels with an eye toward its stated goals: relatively private, secure, fast transactions for considerably less cost than its on-chain, public ledger counterpart.
Researchers simulated traffic in order “to empirically study LN’s transaction fees and privacy provisions,” relying on the network’s own public data, generating such “transactions under assumptions that we attempt to validate based on information spread by certain blog posts of LN node owners.”
They confirm what was already widely understood about LN transaction fees, namely how they’re “economically irrational for the majority of the large routing nodes who currently hold the network together.” Essentially that means either fees or traffic must increase, a lot, to achieve viability, something that isn’t happening on the adoption front by most honest estimations of LN due to a variety of issues, including user experience.
On the issue of privacy, “Even if transactions are onion routed,” researchers explain, “strong statistical evidence on payment source and destination can be inferred, as many transaction paths only consist of a single intermediary by the side effect of LN’s small-world nature.” The computer scientists’ experiments suggest that can be mitigated against by injecting more of what are known as “hops in routing paths” in order to strengthen privacy without additional prohibitive cost. It has been a tough few months, public relations wise, for LN enthusiasts. Last month, a user lost $32,000 using the network, while another group of computer scientists found an attack vector. The month before that, LN developers finally disclosed a critical bug after three months of hints and urging users to quickly upgrade.
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