DESCRIPTION OF EVENTS
"The Lightning Network (LN) is a "layer 2" payment protocol layered on top of a blockchain-based cryptocurrency such as bitcoin or litecoin. It is intended to enable fast transactions among participating nodes and has been proposed as a solution to the bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without delegating custody of funds."
"Normal use of the Lightning Network consists of opening a payment channel by committing a funding transaction to the relevant base blockchain (layer 1), followed by making any number of Lightning Network transactions that update the tentative distribution of the channel's funds without broadcasting those to the blockchain, optionally followed by closing the payment channel by broadcasting the final version of the settlement transaction to distribute the channel's funds."
"To settle the payments the channel must be closed. To initiate this process one node broadcasts the most up to date settlement transaction to the network. The next events can broadly be thought of in two ways, a cooperative closure in which both parties confirm a distribution and funds are immediately settled and an uncooperative closure. Uncooperative closes may be legitimate for example if one node is no longer part of the network or fraudulent with one node broadcasting an incorrect distribution (likely an outdated one). In uncooperative closures the funds are not settled instantly but there is a dispute period within which nodes may contest the broadcast distribution. If the second node broadcasts a more up to date distribution then the funds are transferred entirely to them. This punitive act, known as the breach remedy transaction, prevents nodes from attempting to defraud the network by broadcasting out-of-date transactions."
"Lightning-fast blockchain payments without worrying about block confirmation times. Security is enforced by blockchain smart-contracts without creating a on-blockchain transaction for individual payments. Payment speed measured in milliseconds to seconds." "Capable of millions to billions of transactions per second across the network. Capacity blows away legacy payment rails by many orders of magnitude. Attaching payment per action/click is now possible without custodians." "By transacting and settling off-blockchain, the Lightning Network allows for exceptionally low fees, which allows for emerging use cases such as instant micropayments." "Cross-chain atomic swaps can occur off-chain instantly with heterogeneous blockchain consensus rules. So long as the chains can support the same cryptographic hash function, it is possible to make transactions across blockchains without trust in 3rd party custodians."
"Lightning DOSers seem organized and motivated, developing specialized software to attack the Beta LND nodes. Node hardening is in progress! We're getting a good opportunity to develop robust p2p deployment strategies. @juscamarena just saw a live test of the penalty scenario."
As u/chrisrico explained: “FYI this wasn’t a hacker, but a user on the LND slack who had a corrupted channel database, restored an old backup, then closed his channels. Because the backup was out of date, his node broadcast old channel states and his channel partners’ nodes detected this as fraud and published the penalty transactions.”
"So no hacker was apparently involved, though the responsible user did lose the 0.00299095 BTC they had originally deposited into the channel for their starter balance."
A lightning payment channel keeps track of the current state between two parties. The lightning network has protections in place to enforce a penalty against nodes which attack the network by broadcasting old copies of the state in an attempt to close the transaction. In this case, it appears that the action was not malicious. Only a small quantity of funds were lost due to the incident.
⚡ Hackers tried to steal funds from a Lightning channel, just to end up losing theirs as the penalty system worked as expected : Bitcoin (Feb 17)
@alexbosworth Twitter (Feb 17)
Lightning Network 'Penalty Scenario' Works in Old State Channel Incident (Feb 21)
New Record For Bitcoin Lightning Network As Adoption Grows (Feb 21)
Lightning Network (Feb 21)
Lightning Network - Wikipedia (Feb 21)
https://lightning.network/lightning-network-summary.pdf (Apr 9)