Researchers from cryptocurrency exchange BitMEX have suggested that the privacy and scalability benefits of Bitcoin’s (BTC) implementation of the Lightning Network are less than expected.
A report published by BitMEX on Jan. 11 illustrates the researchers’ efforts to determine the growth of the Lightning Network by trying to extrapolate information about private payment channels from readily available data.
The team focused on non-cooperative channel closures and they suggest that — since the network started its activity — about 60,000 such transactions took place.
A non-cooperative channel closure happens when a Lightning Network node initiates the closure of a payment channel without directly communicating with the node that the channel is linked to.
Non-cooperative channel closures are more easily tracked and recognized, and they have to be confirmed in blocks on the blockchain. Due to these characteristics, BitMEX researchers drew the following conclusion from the higher-than-anticipated number of such transactions:
“The fact that non-cooperative closures are more common than many thought, means the privacy and scalability benefits of lightning are lower than many expected too. However, […] as users learn more about how to use the lightning network and lightning wallets improve, the prevalence of non-cooperative closures could fall.”
The report notes that researchers initially expected to find 30,000 non-cooperative channel closures but instead discovered the aforementioned 60,000. More liberal estimates place the number of such closures at over 90,000, cumulatively spending 1,405 BTC.
The report also explains that in some instances, non-cooperative channel closures see a party attempt to steal the funds, which is called a breach closure. A breach closure can be followed by a penalty transaction if the attempted theft is detected and the other party claims all the funds. Attempts to steal funds in such ways are quite rare, according to the report:
“Our analysis shows that these penalty transactions are very rare. Only 0.30% of non-cooperative closures result in a penalty transaction or 0.22% by value.”
The Lightning Network, while promising according to many, is still largely experimental. As reported in early December 2019, a Redditor “lost” four Bitcoins on the Lightning Network and later published advice based on his experience. He also suggested that users interested in the system should thoroughly research how the system works before using it to send significant amounts of Bitcoin.
Still, Lightning’s promise of nearly-feeless instant transactions has the approval of many in the cryptocurrency community. In November 2019, bond market veteran Nik Bhatia said that with Lightning, Bitcoin has become an unprecedented asset by combining a store of value with medium-of-exchange scale and speed.