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Developer reveals ‘biggest unsolvable Lightning attack vector’

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Independent Bitcoin Lightning developer, Joost Jager, has outlined an exploit of the micro-payments network that could result in channels being compromised with very little effort and negligible cost.

However, he said he’s hard at work on a possible solution.

Jager specifies that the attack could be carried out on wumbo channels, which essentially allow larger transactions between mutually agreeing parties on the Lightning network.

A wumbo channel removes the limit to the total amount of Bitcoin that can be held in a regular Lightning channel — which is around $1,760 worth at today’s prices. It also removes the approx. $450 limit to how large an individual payment can be.

Jager said the wumbo channels can be exploited because the channel cannot hold more than 483 hash and time-lock contracts (HTLCs) at any time regardless of its capacity. So a malicious actor sending 483 micro-payments to themselves, and holding on to the HTLCs is enough to incapacitate a channel for up to two weeks.

The developer demonstrated that this could be achieved by using the maximum route length to add loops and more contracts to quickly reach that total for just a small initial outlay, 5.8 million satoshis in this example.

If the script kid is lucky, they only need to send 54 payments to get it done. A single tiny channel takes double-digit amounts of Bitcoin out of business.

He added that he had started a new firewall for Lightning nodes project called Circuit Breaker to address this problem. When asked whether this ‘griefing attack’ is the biggest unsolved attack vector on LN today, he added;

That depends on how you define biggest. There are other attacks that can make you lose money which seems worse. But this one is one of the biggest in terms of not knowing how to solve it.

With wumbo channels a user can signal that they want to send more BTC than the regular limits and find a node that is willing to receive. Regular Lightning users sending micropayments will not be affected but it is a much better option for business and enterprise payments.

Wumbo channels are growing in adoption and Bitfinex has been the latest to announce support for them;

The word “wumbo” comes from a cartoon series called SpongeBob SquarePants, and refers to the idea that two parties need to agree to ‘wumbo’ together for the transaction to take place.





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China’s attempt to kill Bitcoin failed — Here are 3 reasons why

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Bitcoin (BTC) might have suffered its largest coordinated attack over the last couple of months, but in this instance, the investor community did not capitulate. China outright banning mining in most regions after giving BTC miners a two-week notice and this caused the single largest mining difficulty adjustment after the network hash rate dropped 50%.

The market sentiment surrounding Bitcoin was already damaged after Elon Musk announced that Tesla would no longer accept Bitcoin payments due to the environmental impact of the mining process. It remains unknown whether China’s decision was influenced or related to Musk’s remarks, but undoubtedly those events held a negative effect.

A couple of weeks later, on June 16, China blocked cryptocurrency exchanges from web search results. Meanwhile, derivatives exchange Huobi started to restrict leverage trading and blocked new users from China.

Finally, on June 21, the People’s Bank of China (PBoC) instructed banks to shut down the bank accounts of over-the-counter desks and even their social networks accounts were banned. OTC desk essentially act as a fiat gateway in the region so without them it would be difficult to exchange from Bitcoin to stablecoins.

As these events unfolded, some analysts were reluctant to describe the tactics as nothing other than meaningless FUD, but in hindsight, it appears that China launched a very well-planned and executed attack on the Bitcoin network and mining industry.

The short-term impact could be considered a moderate success due to the collapse in Bitcoin price and the rising concerns that a 51% hashrate attack could occur.

Despite the maneuvers, China’s attack ultimately failed and here are the main reasons why. 

The hashrate recovered to 100 million TH/s

After peaking at 186 million TH/s on May 12, the Bitcoin network hash rate, an estimate of the total mining power, started to plunge. The first couple of weeks were due to restrictions to coal-powered areas, estimated at 25% of the mining capacity.

However, as the ban extended to other regions, the indicator bottomed at 85 million TH/s, its lowest level in two years.

Bitcoin estimated hashrate. Source: Blockchain.com

As the data above indicates, the Bitcoin network’s processing power recovered to 100 million TH/s in less than three weeks. Some miners had successfully moved their equipment to Kazakhstan, while others shifted to Canada and the U.S.

Peer-to-peer (p2p) markets carried on

Even though the companies involved in crypto transactions have been banned from the country, individuals continued to act as intermediaries—some of these recorded over 10,000 successful peer-to-peer transactions according to data from the exchange’s own ranking system.

Huobi Global peer-to-peer market advertisement. Source: Huobi

Both Huobi and Binance offer a similar marketplace where users can trade multiple cryptocurrencies including USD Tether (USDT). After converting their fiat to stablecoin, transacting on a regular or derivatives exchange becomes possible.

Asia-based exchanges still dominate spot volume

A complete crackdown on trading from Chinese entities would likely be reflected in the exchanges previously based on the region, like Binance, OKEx, and Huobi. However, looking at the recent volume data, there hadn’t been a meaningful impact.

Weekly spot volume, USD. Source: Cryptorank.io

Take notice of how the three ‘Asia-based’ exchanges remain dominant, while Coinbase, Kraken, and Bitfinex are nowhere near their trading activities.

China’s ban on Bitcoin mining and transactions may have led to some temporary hiccups and a negative impact on BTC price, but the network and price have recovered in a way that is better than many expected.

Currently, there is no way to measure the OTC transactions where larger blocks are traded but it is just a matter of time until these intermediaries find new gateways and payment routes.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.