Lightning Network (LN) is the proposed scaling solution for Bitcoin without major compromises on security, namely self custody. Aside from massively expediting transaction speed and cost, LN is also said to be an anonymous payment network because it removes transactions from the Blockchain [0]. This is great, because it fixes the two greatest pain points of Bitcoin: portability and fungibility. It puts Bitcoin on the path to become an anonymous, instant and free e-cash; the holy grail of cypherpunks: an ideal money.

Properties of good money.

If this would truly be the case we would not need to offer this grant, but unfortunately reality is more nuanced than this. Although there are things to be said about long term portability aspects of LN, much more work needs to be done on its privacy properties as was highlighted by numerous research papers [1, 2, 3, 4, 5, 6].

Grant Design & Schedule:

1 BTC will be distributed during Wasabi Wallet’s Lightning Network Privacy Research Grant. We’re looking for researchers and teams of researchers to design the best possible privacy-focused Lightning Network light client. One may apply with a team or individually.

  • 0.5 BTC will be given out to the selected research team, while the other...
  • 0.5 BTC will be split between 3 selected individuals to form another research team

The teams will be selected and rewarded with 0.1 BTC each in February, 2022. Research will continue until the 1st of September, 2022. After the research is over, teams will be granted the rest of the reward, assuming the work is well done and is useful.

Narrowing The Research Space

We are not going to give an overview of Lightning Network privacy. Rather, we will describe certain already existing solutions, narrowing down the problem space for the researchers.

Technological Advancements

We’re building software for the future and not for the past. Therefore, we should assume certain technological advancements. For example, we can assume that in the future, computers will rarely be turned off (always on) and everyone will have a reliable and unlimited Internet connection (always online).

Network And Blockchain Level Privacy

Let’s start with an ideal on-chain privacy setup. We assume Tor [7] for communication (notably for transaction broadcasting), full nodes or client side filtering for acquiring wallet state [8] and WabiSabi [9] CoinJoins to fix on-chain privacy issues. This is so far the setup for Wasabi Wallet 2.0 [10]. Furthermore, we’ll also assume Taproot [11] utilization so LN operations won’t be immediately noticeable on the blockchain.
Although we could assume LN operations with coinjoins and indeed that’s possible with Wasabi 2.0, we won’t because we’ll solely focus on privacy here and the assumption that LN operations happen before and after coinjoins will suffice. LN operations inside coinjoins are efficiency improvements.
Finally we can also omit talking about trivial things like how to use Tor circuits properly, not sending unnecessary information to trusted third parties and why not use LN node ID, an alias that is leaking information about your setup or your real world identity. Privacy developers eat such problems for breakfast, assuming they aren’t doing intermittent fasting of course.

Applications

In your application you don’t have to write your own or your team’s ideas because that task is for the research period. We want to hear about your exploration plans, experience and credentials instead. If you are interested, send your application to rafe@zksnacks.com by the end of January, 2022.

References

  • [0] How Does the Lightning Network Affect Users Privacy?
  • [1] An Empirical Analysis of Privacy in the Lightning Network
  • [2] A Quantitative Analysis of Security, Anonymity and Scalability for the Lightning Network
  • [3] A Cryptoeconomic Traffic Analysis of Bitcoin’s Lightning Network
  • [4] Security and Privacy of Lightning Network Payments with Uncertain Channel Balances
  • [5] Security and Privacy of the Lightning Network
  • [6] Privacy Guarantees of the Bitcoin Lightning Network
  • [7] Tor Project
  • [8] Network Level Privacy
  • [9] WabiSabi
  • [10] Wasabi Wallet 2.0 In The Finish Line — Introduction & Demo By The Lead Developers
  • [11] Privacy and Scale — Everything you need to know about Bitcoin’s Taproot