I’ve been thinking of a proposal for an optional broadcast feature on the lightning peer-to-peer gossip network, that announces your inbound and outbound liquidity- working with an algorithm that gives out an original hash that is derived from the value of the percentage of your inbound/outbound liquidity ratio. The hash can match you to channels with the compatible ratios (ie. 80%/20%) saving you fees, and time, and increasing the efficiency of the lightning network.
The hash however, to keep the channel’s inbound and outbound liquidity more anonymous, can use a variable that changes every hour in a consecutive manner, following a rule of thumb( such as using a variable that is going through each hash on each block from the bitcoin blockchain starting from the first block, or a consecutive number 1-1000000…the latter would make it predictable tho) and essentially have the variable change in time intervals of … an hour…or more or less time.
Having a variable change with time would increase the privacy of each node, and would also accommodate for the volatility of the inbound and outbound liquidity ratio on each channel.
I will look into it further, learn more , and play a bit more, and continue this blog later hehe thanx for reading.
ChatGPT’s thoughts:
Your proposal for enhancing the Lightning Network seems thoughtful, aiming to improve the routing efficiency and, by extension, the user experience. Before getting into whether it could work or not, let's outline the key elements you've proposed:
1. **Broadcast Feature**: An optional announcement that includes information about a node's inbound and outbound liquidity.
2. **Hash Function**: Generates a hash from the inbound/outbound liquidity ratio. This hash is used for pairing nodes with compatible liquidity ratios.
3. **Dynamic Variable**: Introduce a time-dependent variable to the hash function to make it less predictable and accommodate liquidity fluctuations.
4. **Privacy**: The dynamic variable and hash ensure privacy, while still permitting efficient routing.
### Potential Advantages
1. **Efficiency**: Your system could result in more efficient routing of payments, as nodes would be better matched in terms of liquidity.
2. **Privacy**: Introducing a variable that changes with time could indeed offer some degree of anonymity.
3. **Adaptability**: The dynamic nature of the hash would allow for fluctuations in liquidity, making the network more resilient and adaptable.
### Concerns and Questions to Address
1. **Complexity**: Adding such a feature increases the complexity of the Lightning Network, making it harder to analyze for security and performance. It also adds an additional layer of operations that nodes have to manage.
2. **Predictability**: If the variable changes in a predictable manner, could an observer track liquidity changes over time to de-anonymize a node?
3. **Centralization Risks**: Is there a risk that this feature could result in network centralization? For example, could this encourage the network to favor large, well-funded nodes that can afford to constantly balance their liquidity?
4. **Spam or False Reporting**: How would the network deal with nodes that broadcast false liquidity ratios? This could be a strategy to attract more payments through a node, for instance.
5. **Network Overhead**: What would be the impact on network performance? Broadcasting liquidity ratios could introduce additional data and computation requirements.
6. **Implementation and Adoption**: How easy would this be to implement in the existing Lightning Network infrastructure? Would it require a significant overhaul, or could it be implemented as an optional feature?
Overall, your proposal has merit but needs to address these and possibly other technical, security, and network economics issues to assess its feasibility and desirability fully.
How would ChatGPT improve it?
Certainly, let's refine your idea by addressing some of the concerns raised:
### Improved Proposal
1. **Optional Participation**: Make this feature optional to begin with, allowing nodes to opt-in. This ensures that only nodes that are comfortable with the new level of complexity participate initially.
2. **Privacy-Enhanced Hashing Algorithm**: Employ a cryptographic hash function that takes not just the liquidity ratio but also a secret nonce and a publicly known, time-based variable. This makes it difficult to reverse-engineer the hash to determine liquidity while allowing a matching algorithm to still operate.
```hash = Hash_function(liquidity_ratio + secret_nonce + time_based_variable)```
3. **Rate Limiting and Time Interval**: Limit the frequency of updates to balance the trade-off between keeping current information and spam protection. For instance, nodes could be allowed to broadcast only once every 10 minutes.
4. **Proof of Authenticity**: Nodes could sign their hash with a private key to ensure the hash announcement is legitimate, reducing the risk of false reporting. An algorithm can then verify the signature before considering the hash for routing.
5. **Dynamic Matching Algorithm**: Implement a matching algorithm that takes into account not just the hash but also other metrics like fees, latency, and historical reliability, to recommend or select channels.
6. **Staggered Rollout**: Implement this as a soft upgrade, so nodes can gradually adopt the new feature without disrupting the existing network.
7. **Review and Audit**: Before full implementation, the feature should undergo thorough review and possibly even a formal verification process to assess its impact on network security and performance.
8. **Time-Based Variable Source**: Utilize an unpredictable yet publicly verifiable source for the time-based variable, like the hash of the most recent Bitcoin block, to improve privacy without making it too predictable.
9. **Penalty for False Reporting**: Introduce a mechanism where nodes found to be consistently broadcasting false ratios are penalized, possibly by being ignored by the algorithm for a period.
10. **Open Source and Community Review**: Lastly, to encourage wide adoption and trust, make the source code for this feature open-source and have it peer-reviewed.
### Summary
The goal is to balance efficiency, security, and privacy. This refined proposal aims to address those aspects by adding layers of verification, making it optional, and providing the flexibility for nodes to be as private or as transparent as they choose to be.
This would still need to undergo rigorous testing and simulations to see how it would operate under various network conditions and malicious scenarios.
(ChatGPT, 2023)