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Author Topic: Lightning Network fraud possible?  (Read 154 times)
ETFbitcoin
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August 16, 2018, 07:22:46 PM
 #21

How will this be handled in a dispute? <Example : Pay-per-view micro transactions with streaming content, when one party provided the service and the other party denies receiving sending the payment for that content>   Huh

In this case, request the payment before providing the service, it's as simple as that. Large companies can afford running a Lightning Network node 24/7 so they won't even need watchtowers in case someone attempts to cheat by broadcasting an old state of the channel.

even though there's anonymity/privacy concern to both parties and anyone who use their channel to route transaction.

The nodes which route the payment don't know who initiated the transaction and what the destination is (assuming that they are not the first and the last node). Sharing the transaction history would be enough (more specifically - payment preimage is needed for each transaction since it's a proof of successful payment). Why are you so concerned about privacy when anyone can view the details of on-chain transactions? The Lightning Network helps to increase the level of privacy, but don't expect to be completely safe.


I'm not concerned about privacy, but few users surely have privacy concern. Even though they should privacy-focused cryptocurrency.

2. Scalability: I thought more scalability can be achieved by transacting off-chain, but if, when closing the channels, we must broadcast the same amount of on-chain transactions to spending funds from off-chain hash-locked outputs, won't it choke the blockchain all the same when we attempt to close the channels this way?

With the combination of other scaling solution such as Schnorr Signature (aka Signature Aggression), Channel Factories and eltoo, these will reduce total on-chain transaction count/size significantly.

Schnorr Signature basically makes transaction with multiple inputs only require 1 signature (which created from multiple input signature) which reduce TX size.
I barely understand about Channel Factories and eltoo, so i suggest you to check these site if you curious :
http://bitcoin.stackexchange.com/questions/67158/what-are-channel-factories-and-how-do-they-work/67187
http://blockstream.com/2018/04/30/eltoo-next-lightning.html

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August 17, 2018, 05:36:47 AM
 #22

Ah, Ok.. I also understand this much better now. I think the main problem I have with this, is the total transparency of the transactions. The only tx that will be auditable will be the settlement tx on the Blockchain and the tx when the channel is opened. The 1000s of tx's that are done with the channel is not auditable.  Huh

How will this be handled in a dispute? <Example : Pay-per-view micro transactions with streaming content, when one party provided the service and the other party denies receiving the payment for that content>   Huh

Interesting question. I think asking both parties to share all transaction/HTLC would be fastest way, even though there's anonymity/privacy concern to both parties and anyone who use their channel to route transaction.

No, it is not about anonymity and privacy, remember with on-chain tx's all the tx's are recorded on the Blockchain, so it is easy for someone to audit the tx history. Will the LN add another layer of anonymity to your tx's, acting as some kind of mixer service, where tx's are done off-chain?

How will my auditors be able to audit my books, if I only provided them with a opening tx and a closing tx on the Blockchain?

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August 17, 2018, 06:05:08 AM
 #23

Ah, Ok.. I also understand this much better now. I think the main problem I have with this, is the total transparency of the transactions. The only tx that will be auditable will be the settlement tx on the Blockchain and the tx when the channel is opened. The 1000s of tx's that are done with the channel is not auditable.  Huh

How will this be handled in a dispute? <Example : Pay-per-view micro transactions with streaming content, when one party provided the service and the other party denies receiving the payment for that content>   Huh

Interesting question. I think asking both parties to share all transaction/HTLC would be fastest way, even though there's anonymity/privacy concern to both parties and anyone who use their channel to route transaction.

No, it is not about anonymity and privacy, remember with on-chain tx's all the tx's are recorded on the Blockchain, so it is easy for someone to audit the tx history. Will the LN add another layer of anonymity to your tx's, acting as some kind of mixer service, where tx's are done off-chain?

How will my auditors be able to audit my books, if I only provided them with a opening tx and a closing tx on the Blockchain?

Sorry i wasn't being specific, what i meant was both parties share all commitment/updated transaction which happen on LN/off-chain. IMO someone can't manipulate the auditor by only show commitment transaction which give him/her advantage since the other would do the opposite or being honest.
But this won't work if both parties cooperate to manipulate the auditor or only one people who want to show the commitment transaction.

Also, as i mentioned before, few users might think about their privacy/anonymity if the auditor decide to use method that i just mentioned. Please CMIIW.

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