Chapter 16. Security and Privacy of the Lightning Network

In this chapter, we look at some of the most important issues related to the security and privacy of the Lightning Network. First, we’ll consider privacy, what it means, how to evaluate it, and some things you can do to protect your own privacy while using the Lightning Network. Then we’ll explore some common attacks and mitigation techniques.

Why Is Privacy Important?

The key value proposition of cryptocurrency is censorship resistant money. Bitcoin offers participants the possibility of storing and transferring their wealth without interference by governments, banks, or corporations. The Lightning Network continues this mission.

Unlike trivial scaling solutions like custodial Bitcoin banks, the Lightning Network aims to scale Bitcoin without compromising on self custody, which should lead to greater censorship resistance in the Bitcoin ecosystem. However, the Lightning Network operates under a different security model, which introduces novel security and privacy challenges.

Definitions of Privacy

The question, “Is Lightning private?” has no direct answer. Privacy is a complex topic; it is often difficult to precisely define what we mean by privacy, particularly if you are not a privacy researcher. Fortunately, privacy researchers use processes to analyze and evaluate the privacy characteristics of systems, and we can use them too! Let’s look at how a security researcher might seek to answer the question, “Is Lightning ...

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