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LN routing and conclusion of ch12

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Andreas M. Antonopoulos 2017-03-14 14:30:09 +02:00
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@ -454,4 +454,56 @@ Flowing back through the route, the secret +R+ allows each participant to claim
Alice has paid Eric 1 bitcoin without opening a channel to Eric. None of the intermediate parties in the payment route had to trust each other. For the short-term commitment of their funds in the channel they are able to earn a small fee, with the only risk being a small delay in refund if the channel was closed or the routed payment failed.
==== Routing in the Lightning Network
==== Lightning Network Transport & Routing
All communications between Lightning Network nodes are encrypted point-to-point. In addition, nodes have a long-term public key that they use as an identifier and to authenticate each other.http://bitfury.com/content/5-white-papers-research/whitepaper_flare_an_approach_to_routing_in_lightning_network_7_7_2016.pdf
Whenever a node wishes to send a payment to another node, it must first construct a _path_ through the network by connecting payment channels with sufficient capacity. Nodes advertise routing information, including what channels they have open, how much capacity each channel has and what fees they charge to route payments. The routing information can be shared in a variety of ways and different routing protocols are likely to emerge as Lightning Network technology advances. Some Lightning Network implementations use the IRC protocol as a convenient mechanism for nodes to announce routing information. Another implementation of route discovery uses a P2P model where nodes propagate channel announcements to their peers, in a "flooding" model, similar to how bitcoin propagates transactions. Future plans include a proposal called http://bitfury.com/content/5-white-papers-research/whitepaper_flare_an_approach_to_routing_in_lightning_network_7_7_2016.pdf[Flare], which is a hybrid routing model with local node "neighborhoods" and longer-range beacon nodes.
In our previous example, Alice's node uses one of these route discovery mechanisms to find one or more paths connecting her node to Eric's node. Once Alice's node has constructed a path, she will initialize that path through the network, by propagating a series of encrypted and nested instructions to connect each of the adjacent payment channels.
Importantly, this path is only known to Alice's node. All other participants in the payment route see only the adjacent nodes. From Carol's perspective, this looks like a payment from Bob to Diana. Carol does not know that Bob is actually relaying a payment from Alice. She also doesn't know that Diana will be relaying a payment to Eric.
This is a critical feature of the Lightning Network, because it ensures privacy of payments and makes it very difficult to apply surveillance, censorship or blacklists. But how does Alice establish this payment path, without revealing anything to the intermediary nodes?
The Lightning Network implements an _Onion Routed Protocol_ based on a scheme called https://cypherpunks.ca/~iang/pubs/Sphinx_Oakland09.pdf[Sphinx]. This routing protocol ensures that a payment sender can construct and communicate a path through the Lightning Network such that:
* Intermediate nodes can verify and decrypt their portion of route information and find the next hop
* Other than the previous and next hops, they cannot learn about any other nodes that are part of the path
* They cannot identify the length of the payment path, or their own position in that path
* Each part of the path is encrypted in such a way that a network-level attacker cannot associate the packets from different parts of the path to each other
* Unlike Tor, (an onion routed anonymization protocol on the Internet), there are no "exit nodes" that can be placed under surveillance. The payments do not need to be transmitted to the bitcoin blockchain, the nodes just update channel balances.
Using this onion routed protocol, Alice wraps each element of the path in a layer of encryption, starting with the end and working backwards. She encrypts a message to Eric with Eric's public key. This message is wrapped in a message encrypted to Diana, identifying Eric as the next recipient. The message to Diana is wrapped in a message encrypted to Carol's public key and identifying Diana as the next recipient. The message to Carol is encrypted to Bob's key. Thus, Alice has constructed this encrypted multi-layer "onion" of messages. She sends this to Bob, who can only decrypt and unwrap the outer layer. Inside, Bob finds a message addressed to Carol that he can forward to Carol but cannot decipher himself. Following the path, the messages get forwarded, decrypted, forwarded etc, all the way to Eric. Each participant knows only the previous and next node in each hop.
Each element of the path contains information on the HTLC that must be extended to the next hop, the amount that is being sent, the fee to include and the CLTV locktime (in blocks) expiration of the HTLC. As the route information propagates, the nodes make HTLC commitments forward to the next hop.
At this point, you might be wondering how it is possible that the nodes do not know the length of the path and their position in that path. After all, they receive a message and forward it to the next hop. Doesn't it get shorter, allowing them to deduce the path size and their position? To prevent this, the path is always fixed at 20 hops and padded with random data. Each node sees the next hop and a fixed length encrypted message to forward. Only the final recipient sees that there is no next hop. To everyone else it seems as if there are always 20 more hops to go.
==== Lightning Network Benefits
A Lightning Network is a second-layer routing technology. It can be applied to any blockchain that supports some basic capabilities, such as multi-signature transactions, timelocks and basic smart contracts.
If a Lightning Network is layered on top of the bitcoin network, the bitcoin network can gain a significant increase in capacity, privacy, granularity and speed, without sacrificing the principles of trustless operation without intermediaries.
Privacy:: LN payments are much more private than payments on the bitcoin blockchain, as they are not public. While participants in a route can see payments propagated across their channels, they do not know the sender or recipient.
Fungibility:: LN makes it much more difficult to apply surveillance and blacklists on bitcoin, increasing the fungibility of the currency.
Speed:: Bitcoin transactions using LN are settled in milliseconds, rather than minutes, as HTLCs are cleared without committing transactions to a block.
Granularity:: LN can enable payments at least as small as the bitcoin "dust" limit, perhaps even smaller. Some proposals allow for sub-satoshi increments.
Capacity:: LN increases the capacity of the bitcoin system by several orders of magnitude. There is no practical upper bound to the number of payments per second that can be routed over LN, as it depends only on the capacity and speed of each node.
Trustless Operation:: LN uses bitcoin transactions between nodes that operate as peers without trusting each other. Thus, LN preserves the principles of the bitcoin system, while expanding its operating parameters significantly.
Of course, as mentioned previously, the Lightning Network protocol is not the only way to implement routed payment channels. Other proposed systems include Tumblebit and Teechan. At this time, however, the Lightning Network has already been deployed on testnet. Several different teams have developed competing implementations of LN and are working towards a common interoperability standard (called BOLT). It is likely that Lightning Network will be the first routed payment channel network to be deployed in production.
=== Conclusion
We have examined just a few of the emerging applications that can be built using the bitcoin blockchain as a trust platform. These applications expand the scope of bitcoin beyond payments and beyond financial instruments, to encompass many other applications where trust is critical. By decentralizing the basis of trust, the bitcoin blockchain is a platform that will spawn many revolutionary applications in a wide variety of industries.