Bitcoin Lightning Network vulnerabilities may result in loss of funds

Posted: 3 September 2019 12:40 pm

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As far as "vulnerabilities which may result in loss of funds" go, this one doesn't look too bad.

Bitcoin Lightning Network users are being strongly urged to update their nodes following the discovery of "security issues... found in various Lightning projects which could cause loss of funds."

Full details of the vulnerability will be released on 27 September, and users should ensure they've updated well before then.

Based on the updates required, it's suspected that the vulnerability may be related to the Eclair Bitcoin wallet for the Lightning Network.

Minimal risks

The updated versions, which should fix whatever this vulnerability is, have been available for a while now so the total amount of funds at risk may be minimal compared to the standards of usual crypto vulnerabilities as long as people have been making routine updates.

At the same time, Lightning Network is still very much for enthusiasts, so its users are probably a bit more likely to have made these routine updates than your average user elsewhere.

Plus, the relatively limited levels of liquidity currently in the Lightning Network mean the total amount of funds at risk here is limited. Even if everything goes as wrong as possible, only about US$8 million equivalent is potentially at stake. It's a far cry from the several hundred million lost in the Parity Wallet bug and many other incidents.

And of course, anyone who operates a Lightning Network node has already come to terms with the fact that they'll probably be losing money through simple operating costs alone. Once you factor in the cost of the trapped liquidity, you have an even bigger loss for operators.

It's funny how the security of the Bitcoin main chain is based on the assumption that people will typically operate in accordance with rational economic self-interest, while the usability of the Bitcoin Lightning Network is based on the assumption that people will be willing to take a loss to provide charitable Lightning Network services.

And it's even funnier that both of these contradictory assumptions have still been true to date.

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Disclosure: The author holds BNB and BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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