From rusty at rustcorp.com.au  Wed Jul 20 00:57:30 2016
From: rusty at rustcorp.com.au (Rusty Russell)
Date: Wed, 20 Jul 2016 10:27:30 +0930
Subject: [Lightning-dev] LN question - real life transaction bundling
In-Reply-To: <578CC8CD.1090803@gmail.com>
References: <578208C9.4090807@gmail.com> <87bn1vivop.fsf@rustcorp.com.au>
	<578CC8CD.1090803@gmail.com>
Message-ID: <87mvld15z9.fsf@rustcorp.com.au>

Ron OHara <ron.ohara54 at gmail.com> writes:
>> (Now, there's another question about whether stores will actually do
>> this themselves, or outsource to Coinbase etc, just like bitcoin...)
>
> As I understand it, the recipient is still 'pending' settlement to the
> blockchain for any funds they receive.

Only a sense that all bitcoin funds are "pending settlement to the
blockchain".

ie. They're immediately available to use on the lightning network, and
only require a counter-signature to make normal on-chain bitcoin
transactions.

To make this concrete: we've discussed a simple protocol extension where
you would agree with your counterparty to split the funding transaction
in order to pay some of it to a given bitcoin address.  That makes it no
worse than a normal bitcoin transfer from a wallet.

(With the usual caveat, that if your channel counterparty is
unresponsive, you will suffer a delay).

>> Kind of.  It's better, and worse.  If Alice only has one channel, and
>> it's to Bob, Bob can see all the amounts Alice spends.  It's fairly easy
>> to make sure Bob can't see the final destination (just the next hop),
>> but he gets an idea of the amounts.  Nobody else can see it unless Bob
>> shows them though, so it's not quite the same as on-chain.

> Traffic analysis is a lot more powerful than you seem to realize. Even
> in a huge maze of convoluted transactions with many parties involved,
> traffic analysis of a system that does not deliberately/randomly delay
> interactions easily detects correlations - even when the content is
> encrypted. That is precisely how Bletchley Park worked during WWII for
> at least half of the information it gleaned. Breaking Enigma was not the
> only tactic those guys used.

Yes, I am very aware of the power of traffic analysis, especially if
you're considering an adversary with global view.  Timing analysis will
be an ongoing battle, IMHO.

But bear in mind that we're comparing this with bitcoin, which sets a
pretty low bar.

> As I see it, LN with hubs (with routing) really only starts to gain
> major traffic optimization wins, when it has a lot of channels and
> participants..
>
> But how do you get there? A chicken and egg business problem.

I think instant payments have great value.  But only if there is someone
to receive the payments :)

I expect LN service to bootstrap slowly along the same lines as bitcoin,
possibly with a killer app to accelerate growth (lightningdice? I have
no idea).

Cheers,
Rusty.