@Layers announced today on SN a new service which gives "insights" gleaned from publicly available data.
LNRouter and similar services have existed for over a year now.
Mempool.space merged this GitHub PR which attempts to identify the addresses of public LN nodes. It will be freely accessible on their site.
This is commercial-grade surveillance software. You can bet your private keys that similar tools have been available to tyrants and compliance bros for a while now.
It's good to see products like Layers offer access to anyone who pays the fee (or for free). Not just exclusively governments like ChainAnalysis has for years!
As surveillance techniques gain popularity, it helps to point out the obvious flaws in LN privacy and give the network's operators a new goal: make the surveillance tools obsolete!
First, understand the problem:
You can identify net payment flows between nodes because...
When a channel closes, it spends to two address (one for each node).
Typically, nodes will open new channels with these channel closing outputs.
Software can monitor the LN gossip network for new channel points which spend the UTXOs from a previous channel close. (Common input ownership heuristic).
Software can identify which node received the majority of the channel's capacity. The address and closing amounts of both nodes has now been doxxed.
Nodes can thwart this kind of surveillance by...
- mixing their UTXOs after closing channels.
Explore using a tool like nolooking which creates a PayJoin batch channel open transaction. Would love to see more wallets with custom channel transactions or implement privacy-aware coin selection.
I remain long-term bullish on LN privacy. The incentive for node operators is to keep their payment flows hidden. Else, they risk revealing their most profitable channels and loosing revenue to competitors.
The solutions to these growing pains don't build themselves!
Be aware. Use the tools. Fuck the snoops. Carry on!