Posted on

Imperfect Pictures: Bitcoin Lightning Images Aren't What They Seem

There’s more to bitcoin’s lightning network than meets the eye.

That said, data visualizations have become a favorite tool for bitcoin users eager to tell the story of the steady adoption of the in-development payments technology. Already, a ton of visualizers have been launched to depict the network in novel ways – from 3D renderings and historical time series to family trees and experimental animations.

Like blossoming clusters of galaxies, watching the nodes and channels unfurl into complicated webs has become somewhat of a sport for lightning fans.

“I used to check the bitcoin price every day, but now I check the lightning network nodes every day,” a lightning enthusiast wrote on Reddit, adding that unlike the price charts, lightning is always on an upward trend.

But according to several developers that work on lightning implementations, the images don’t tell the whole story.

“Most of the snapshots will become increasingly irrelevant,” said Olaoluwa ‘Laolu’ Osuntokun, a developer at Lightning Labs, which recently launched its lightning network implementation into public beta.

For one, the pictures are based on views from a single node, which has limited access to the entire lightning network.

“It isn’t authoritative, not really indicative of the longer-term topology,” Osuntokun continued.

Nevertheless, the images right now play an important role, often deployed to solve unanswered questions about how the network is growing, namely whether lightning is fulfilling its (sometimes contested) promise of decentralization.

“It gives people something they can point to to say, ‘Look it’s lightning!'” Osuntokun said.

Pseudonymous developer “Intel,” who created the popular lightning mainnet explorer, #recksplorer, agreed, saying visualizers are the easiest way to observe the network growth at this point.

Intel continued:

“You can visually compare how they looked before and look now, making the network growth really noticeable. It’s much more eye candy than sharing raw numbers of network nodes.”

A complete picture?

Still, according to Osuntokun, as the network continues to grow, these visual depictions will become more problematic.

While users have at times complained about the lack of visibility across the whole network, thinking it was due to faulty code, the partial view of the nodes is a necessary characteristic, as it enhances privacy and cuts down on individual node storage costs.

Plus, because of certain implementation parameters, if a channel has been inactive for more than two weeks or it contains a very small amount of funds, the channels might not be visible to all nodes. And finally, there could be nodes and channels that don’t announce themselves at all.

“It’s actually optional for nodes to send out authenticated proofs attesting to the existence a channel,” Osuntokun said.

As such, even layering views from multiple nodes wouldn’t give you a complete picture.

Tyzbit, the pseudonymous author of several interactive lightning visualizers, compared this to a dark, crowded room, with groups of people hidden behind others.

“You don’t need to know about everyone in the room to send money to someone, you just need one working route,” tyzbit explained. “No one has a perfect picture of the network.”

But according to Osuntokun, while that could worry people that actually the lightning network isn’t growing as fast as some suggest, it actually displays the more positive opposite.

Because on lightning, there’s no need for consensus, or, a global agreement of what the network is, it’s even possible that several, unconnected lightning networks could exist at once. With this in mind, it’s likely that lightning could be much bigger than depicted in the images.

He told CoinDesk:

“An explorer should only be seen as a lower bound for the number of nodes or channels on the network.”

The end of visualizers

Still, visualizers may have a short shelf life anyway.

For one, Osuntokun said that as lightning adds more privacy features, visualizers will be unable to gather more specific data, like physical location, about the nodes. This is obviously a benefit for users since data about their location could expose them to attacks, but it’s at the expense of the visual tools.

“As the graph gets larger and larger, visualizations will probably start to collapse channels into one another in order to reduce the dimensionality of the rendering,” Osuntokun said, “otherwise, things may just end up looking like a ball of yarn pretty soon.”

Intel echoed this point, stating that visualization software will eventually not be able to handle the amount of overlaps in the network.

“[A] large lightning network becomes like a tangled mess, and there is no way that you can untangle it for visualization purposes,” he said.

And this might be coming sooner than later. For instance, despite being labelled reckless for users to transact on the lightning network before Lightning Lab’s March beta release, Intel’s explorer saw rapid growth, reaching 1,337 nodes and 3,798 channels in a matter of weeks.

Even at its current size, the developer’s explorer is already a bit unruly.

Because of that, Intel concluded:

“You can already see that happening on my explorer. The future of network visualizers is uncertain.”

Lightning network visualizer image via #recksplorer

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Bitcoin Lightning Startup Goes Beta With Twitter CEO Backing

A version of bitcoin’s much-anticipated Lightning Network is finally ready for real users.

Announced today, California startup Lightning Labs has officially launched a beta version of its software (LND), making available what investors and project leads say is the first thoroughly tested version of the tech to date. This means that users can now leverage LND to send bitcoin and litecoin to other users, all without settling those transactions on the blockchain.

While this software is one of several seeking to form a combined network that aims to make cryptocurrency transactions faster and cheaper, today’s development effectively takes bitcoin a step closer to new kinds of applications, such as Internet of Things payments and recurring billing.

That’s because, similar to bitcoin, the Lightning protocol isn’t managed by any one person or company. It’s a series of compatible technologies. Bitcoin-centric startup Blockstream released a candidate version 1.0 of the Lightning protocol specification in January, and ACINQ, another like-minded startup, already offers a live, yet unpredictable beta software that works with bitcoin.

Still, the Lightning Labs software is believed to be the most mature software to date – and investors are using the launch to signal their interest.

Also revealed today, Lightning Labs has raised $2.5 million from nearly a dozen investors including Twitter CEO Jack Dorsey, Square Capital executive Jacqueline Reses, litecoin creator Charlie Lee and former PayPal COO David Sacks.

While Dorsey and Reses declined to comment other than to confirm they invested, Sacks was vocal in his belief that the beta release marks a crucial moment in bitcoin’s history.

“Lightning is the most important protocol being built on bitcoin and Lightning Labs is the best developer of that protocol,” Sacks told CoinDesk.

Fellow investor Ben Davenport, CTO at the blockchain security company BitGo, agreed the launch is a pivotal milestone.

He told CoinDesk:

“It’s something the entire community has been focused on and working towards for the better part of two years now. It’s really the culmination of a lot of work by many people, not just Lightning Labs. … We see it as a very important piece of the scaling solution for bitcoin, and perhaps other digital currencies as well.”

Team spirit

To Lee’s point, thousands of people around the world contributed to today’s Lightning release, from volunteer testers who helped find bugs in the original alpha version, to developers like Jim Posen at the exchange platform Coinbase, who contributed code through GitHub.

“The community engagement around Lightning has been amazing,” Lightning Labs CEO Elizabeth Stark told CoinDesk, adding that she plans to keep the software freely accessible. “The protocol will always be open source and right now everything we are making will be open source,” she said.

When Stark asked the audience at a recent decentralization summit in Berlin who had already tested Lightning, hundreds of people raised their hands. “We have around 1,800 people on the Slack for LND alone,” she added. “We already have dozens of apps that developers have built.”

But it’s important to note that even this beta should be used with caution.

Stark’s team built in a few safety measures to limit the amount of cryptocurrency people can send for now to roughly $1,400 worth per channel, or around $400 per payment. The target demographic for the release is developers and “advanced users” who are able to run a full node and use LND’s command-line interface.

Stark went on to warn that users should not experiment with more money than they are willing to lose.

“We were not recommending use on the main bitcoin network before this beta because there are certain features, such as a wallet seed backup, that were not there previously. There are new features included as well, there are bug fixes and stability improvements,” she explained.

Booting up

Still, it’s a release that’s likely to spur interest and engagement, given that developers are already sending money over the network – regardless of warnings.

As such, Stark now expects people with the skills to host their own bitcoin or litecoin node to add Lightning Labs’ free software to the mix for quicker, cheaper transactions. Already, there are already roughly a 1,000 nodes implementing Lightning software. Investors in the project believe the release will boost that growing number.

Davenport said:

“What I hope to see, and am optimistic to see, is a Cambrian explosion of development of Lightning-based apps and other things that incorporate Lightning.”

Several contributors spoke of Lightning as a long-term investment in blockchain infrastructure, something that Lee, whose time is dedicated toward a wholly different protocol, spoke to.

A long-time advocate for Lightning, Lee expressed his hope that even more experiments will now be possible with the software, including transactions that occur across blockchains.

“It’s great to see Lightning Network being used in the real world. I’m also excited to soon being able to do cross-chain atomic swaps between bitcoin and litecoin,” he said.

In this way, Lee’s comments can be seen as summing up the impact of the day’s news.

If bitcoin really is the ground floor of the emerging cryptocurrency ecosystem, then Lightning is the first staircase. This release marks a vote of confidence that the staircase really is safe for builders to start, with cautious steps, climbing up.

Copper wiring image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Will Lightning Help or Hurt Bitcoin Privacy?

Faster, cheaper bitcoin transactions? Check. But at what cost?

For bitcoin users, many of whom were drawn to cryptocurrency for its promise of financial sovereignty, bitcoin is still synonymous with privacy. But the gap between the vision and the reality, in which user transactions today must be published to a globally distributed ledger, has long been one of the technology’s biggest points of controversy.

“Bitcoin is Twitter for your bank account. Everything is public to everyone,” Ian Miers, the co-founder of the privacy-centric cryptocurrency zcash, told CoinDesk.

Compounding matters, however, is that as bitcoin users get closer to gaining a whole new way to send transactions, powered by an innovation called the Lighting Network, concerns are spreading that privacy could degrade from its already imperfect state.

On the surface, the idea might seem promising – because Lightning payments occur “off-chain,” the information isn’t included in the blockchain that all nodes store.

But while there is no Lightning ledger so to speak, payments in the scheme are still broadcast across nodes within the network. Essentially, to ensure routing is always available, those using Lightning channels need to trust other network users to help relay transactions.

Conceptually, this means that participants within the system could pry on a transaction, or even potentially sell that information to governments or advertisers. This is a risk that’s worsened if the network becomes centralized into a “hub-and-spoke” type structure, where hubs are large, well-known and often-used entities.

“Lightning likely won’t improve privacy, it may make it much worse from an average consumer’s perspective,” Miers added.

And like many, more speculative concerns surrounding the upcoming tech, the risk to user privacy may not be obvious until the network is deployed – an uncertainty that, combined with a wave of efforts on behalf of Lightning developers to include privacy features, has led to mixed sentiments as to what the future of private bitcoin transactions might be.

According to privacy researcher Kristov Atlas, in a worst-case scenario, privacy attackers could “thrive” on hubs “vampirically feeding off” the data as he wrote in a blog post.

However, the upcoming Lightning release does have some privacy features embedded, and there’s reason to believe that developers are at least making advances on the problem.

Onion-routing

To date, the most advanced privacy feature included within Lightning is called “onion routing,” and it’s part of the Basics of Lightning Technology (BOLT), a series of protocols that ensure the multiple iterations of Lightning can interoperate.

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

For instance, upon receiving an encrypted payment, a node can only know where that payment came from and to what node that payment should be relayed.

According to Olaoluwa Osuntokun, a leading figure in Lightning development who first suggested the scheme on the developer mailing list, the importance of this is that nodes can’t be selective when it comes to what payments they’re willing to take.

“Nodes shouldn’t be able to arbitrarily censor certain payments, or blacklist certain destinations within the channel graph,” Osuntokun explained.

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

“Similar to Tor, there exist known possibilities of timing leaks, and also unknown active attacks that may be viable,” Osuntokun said.

And according to some, there’s ways that onion-routing could be manipulated, leading to the loss of privacy, especially in an early Lightning network.

For example, the last node within a route, as well as whoever sent that payment, will know the transaction information, and theoretically, nodes could collude to break privacy, piecing together each layer of the payment in order to create a complete picture.

On top of this, there’s the risk of a “global adversary which is able to instantaneous monitor all channels on the network,” something that the current privacy protocol doesn’t address, Osuntokun continued.

Fixed identifiers

And there’s further defects to privacy on Lightning today as well.

For example, Lightning payments are currently given a fixed identifier that is repeated throughout the entire route. “This means that if an adversary has two non-contiguous nodes on the route, then they can trivially link a payment flow,” Osuntokun said.

That said, Osuntokun assured that there’s ways to correct this in future.

For example, if Schnorr signatures, a scaling method that works by aggregating public keys, are adopted into bitcoin, it could correct this issue in a “simple and attractive” way, Osuntokun said.

Plus, there’s other, “more heavy weight solutions” such as using zero-knowledge to encrypt payments. However, because this encryption device is heavy, it will “significantly increase the amount of data one needs to send in order to complete a payment,” Osuntokun said.

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

Hub and spoke

Even more speculative risks exist as well, but according to Miers, it’s all highly contingent on the structure that the Lightning network will take.

“Some people think the amount of money you need to lock up in a channel and the costs of running nodes will inevitably lead to centralization,” Miers said. “And then there’s clearly no privacy.”

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

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

Programming the system to open channels at random, Lightning “tries to avoid having hubs that can observe traffic,” Decker explained, which has the added benefit of “strengthen[ing] the network as a whole against single points of failure.”

Decker said that this randomness could be extended to how routes are formed on the network, making payment paths less predictable but potentiality increasing fees.

Other researchers maintain the risk involved in maintaining a node with high throughput will stave off the formation of centralized hubs.

Miers concluded:

“We will see which one actually ends up happening.”

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

Tesla coil image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

Posted on

What the Data Tells Us About Bitcoin in 2017

Jameson Lopp is an engineer at BitGo and the creator of Statoshi.info.

The following article is an exclusive contribution to CoinDesk’s 2017 in Review.


I’ve always been fascinated with the raw numbers relating to the operational status and growth of bitcoin, especially as we ride the rollercoaster of the adoption life cycle.

That’s why I created Statoshi.info in 2014 to track bitcoin metrics from the perspective of a full node.

To that same end, I’ve compiled statistical measurements of bitcoin’s growth in 2017 from a variety of sources.

A couple things are clear: bitcoin is at the forefront of an increasingly complex ecosystem that continues to grow in a variety of ways. And for the ninth straight year, it stubbornly refused to die.

While 2017 is well known as the year that institutional investors started showing interest in bitcoin, it was also picking up steam in smaller countries.

Academic interest continued to increase, which is great for the long-term prospects of this industry as we continue to gain a greater understanding of what we’re building.

Funding and forking

Venture capital funding continued to flow it in at pretty healthy levels, though there’s more to this story.

It may be that VC funding did not accelerate because new funding avenues have opened up for entrepreneurs in this space. The initial coin offering (ICO) boom of 2017 saw unprecedented levels of funds raised in a non-traditional form. CoinDesk’s ICO tracker logged over $3.5 billion in funds raised via ICOs!

On top of the ICO explosion we also saw another type of boom: in a new type of bitcoin fork that has come to be known as an “altcoin airdrop.”

While most of the crypto assets in existence have been created via software forks of Bitcoin Core, they have historically started with a new genesis block and thus a new distribution scheme for the tokens themselves.

You can see a fairly complete list of the airdrops at btcdiv.com, but many of them don’t even show up on market cap lists because they have little value.

From looking at the top few forks you could claim that about $50 billion in value was created/raised via bitcoin forks in 2017.

As an engineer who had to deal with the fallout from the fork frenzy, it became tiring pretty quickly as it was clear that the vast majority of these forks would not have sufficient value to warrant spending scarce developer resources trying to support them.

Technical development

At a protocol level, there was a great deal of work done in 2017. The Bitcoin Core repository in particular was a hive of activity.

Bitcoin usage

While you may think of bitcoin as being a cryptocurrency, some users think of it as a trust anchor. By embedding data into bitcoin’s blockchain, other systems can gain new properties such as tamper evidence and immutability.

The amount of outputs that embedded data into the blockchain more than doubled year over year, due to the increased popularity of platforms such as Blockstack, Colu, and Omni.

As adoption continued to increase, so did the size of the unspent transaction output (UTXO) set, AKA the state of all bitcoin ownership.

A more controversial aspect of the changing nature of bitcoin is the transaction fees.

While rising fees have caused significant frustration for users trying to transact in smaller amounts of value, an optimistic view is that the network security is on the right path toward sustainability.

If fees don’t eventually replace the block subsidy, then either the thermodynamic/computational security of the network will have to drop or perpetual inflation will have to be introduced in order to pay miners to maintain the same level of hashing power.

Bitcoin’s privacy properties are still pretty terrible, but at least we’re seeing some improvement on the address reuse metrics.

Network security and health

The size of the network mesh of nodes that validate and propagate bitcoin data is back on the rise after stagnating for several years.

As bitcoin becomes more valuable, miners are able to expend more energy securing the system from computational attack.

Technical improvements to block propagation continued to decrease the latency at which new blocks are seen by most peers across the network. This means that nodes come to consensus about the state of the blockchain faster, which reduces the occurrence of orphaned blocks.

Bitcoin economics

With an exchange rate increase of over 1,300 percent, bitcoin’s market cap increased past $230 billion, earning it 19th place globally in terms of M1 money supply.

While 30-day BTC/USD volatility was on the decline in 2015 and 2016, it began rising again in 2017.

On average, an estimated $12,000 per second was transacted via BTC in 2017 compared to ~$2,000 per second in 2016.

Interestingly, the output value of the average transaction (without trying to guess and subtract change outputs) appeared to rise along with the exchange rate. Almost as if BTC is being used as the primary unit…

And indeed, we can see from the raw UTXO value being spent that it was pretty consistent in BTC terms.

Bitcoin in 2018

Looking forward to 2018, Lightning Network development has been progressing nicely. I wrote about the promise of Lightning Network two years ago and it’s finally coming to fruition, though there are still plenty of challenges to overcome.

We’ve even seen Lightning Network payments conducted on the main network!

The next phase of development in the ecosystem will be speeding up economic interactions.

Payments via second-layer networks will be one leap forward, but the “atomic age” will usher in even greater innovations such as trustless, decentralized, real-time peer-to-peer exchanges.

I expect 2018 to be another exciting year with plenty of development and drama. Stay tuned!

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Blockstack and Colu.

Network image via Shutterstock

The leader in blockchain news, CoinDesk strives to offer an open platform for dialogue and discussion on all things blockchain by encouraging contributed articles. As such, the opinions expressed in this article are the author’s own and do not necessarily reflect the view of CoinDesk.

For more details on how you can submit an opinion or analysis article, view our Editorial Collaboration Guide or email news@coindesk.com.