Question of trust regarding LSPs \ stacker news ~lightning

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385 sats \ 18 comments \ @Fiatrevelation 17h lightning

I assume there is technical answer to this problem (which, admittedly, is being asked by an un-technical person, but that won't stop me from wondering). Can someone can explain in un-technical terms the mechanism that secures the 0conf channel that Zeus opens to my mobile node to when I 'rent' inbound liquidity from them.

I assume that the LN has this security built in. But to what level am I trusting that LSP funds are not being 'double-spent,' since none of these channel-opens are being broadcast?

In theory, such a rule enforcement would necessarily limit how much liquidity a LSP can provide in total, based on their un-deployed funds, so then will we start to see their prices increase with demand? Has this already happened over the life-span of the lightning network?

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128 sats \ 0 replies \ @endothermicdev 16h

There is no security in 0-conf. Use it at your own risk. That said, Zeus does have a reputation, and they take no risk in opening the 0-conf channel to you. They're probably not incentivized to rug you, but you're absolutely trusting them when receiving on an unconfirmed 0-conf channel.

111 sats \ 2 replies \ @justin_shocknet 15h

prices increase with demand? Has this already happened over the life-span of the lightning network?

Channel prices used to be absurdly low, because LSP's thought they'd make it up in transaction fees before reality set in.

LSP is a terrible business, you're trying up capital in a hot wallet which involves risk for very little return in tx fees... so lease rates should trend toward reflecting both risk, and eventually opportunity cost once there's more legitimate Bitcoin "yielding" opportunities.

So, I expect prices will go up further. You'll probably find the channel closed if you don't use it enough or its too unbalanced to be economical for the LSP.

For a bit of history, Voltage created the "Flow" spec for LSP's selling channels that Zeus is now using. Voltage themselves stopped selling channels (at least to their non-hosting customers?) altogether last year, they were insanely cheap... Zeus is at least sane and charges a much higher rate.

This is why mobile nodes are a dead-end, they're too costly to maintain for the low volume and online-ness of a mobile device. The solution is a shared node used by multiple things to consolidate utility, we use Zeus as the preferred LSP in Lightning.Pub so you can have multiple devices / apps connected to something always online and accessible over Nostr.

0 sats \ 1 reply \ @Fiatrevelation OP 15h

transaction fees before reality set in.

As in routing tx fees?

This is why mobile nodes are a dead-end, they're too costly to maintain for the low volume and online-ness of a mobile device.

Too costly for the users or the service providers? I would guess that LSP market is mainly comprised of people who put a high value on the convenience of not having to self-host. It is a good price for a noob to start learning and is not as steep a learning curve as a self-hosted set-up.

0 sats \ 0 replies \ @justin_shocknet 15h

As in routing tx fees?

Correct

service providers

This one, they need to be compensated for tying up and risking capital in a hot wallet.

Yea LSPs are absolutely selling a convenience product, it's just a bad business without charging high fees... and it's the high fees make mobile nodes non-sustainable.

11 sats \ 13 replies \ @DarthCoin 16h

the 0conf channel that Zeus opens to my mobile node to when I 'rent' inbound liquidity from them.

Those are not "0-conf" channels. Are JiT (just-in-time) or inbound channels and there ARE broadcasting the onchain tx. Only that are available to use instantly (not after 3 conf as normal channels) because for them, there are no funds to lose, they already charged you a fee.

Here is what Olympus LSP is offering: https://docs.zeusln.app/category/services And do not confuse them with these: https://docs.zeusln.app/for-users/embedded-node/trusted-funding

The so called 0-conf channels are something else and I presented them here in this SN post just few days ago: #909079

11 sats \ 12 replies \ @justin_shocknet 16h

The JIT uses 0-conf still per the docs, so the received amount is still trusted at least temporarily

There was a epidemic of trust smuggling when it looked like the boot was going to come down last year, all this fragile JIT/Wrapped Invoices stuff worked its way in for optics

0 sats \ 11 replies \ @Fiatrevelation OP 15h

The LSP detects the payment and opens up a 0-conf, just in time, channel to the receiver

Yea, this part is confusing for me. JiT channels allow a receiver to borrow liquidity from an LSP in using a wrapped invoice. At what point does this confirm on-chain?

If its not confirming on-chain at the time the channel is being opened, this sounds trusted. If its not confirming on-chain, then what enforces the LSP to be responsible and not double spend?

11 sats \ 5 replies \ @justin_shocknet 15h

It's definitely trusted until it's confirmed, I don't know the specifics of the implementation as to when it's broadcasted... the 0-conf in this context is that its a real channel but you can make state updates BEFORE its confirmed (can also be rugged before its confirmed)

Actually you're trusting them not to generate a thefty wrapped invoice too that doesn't forward to you, Stacker News does this too for ... because optics

Its all theater, its effectively no different than using a custodial wallet to save and buy a channel when ready, ShockWallet and Lightning.Pub lets you determine when this is to make it more cost effective beyond being a shared node

17 sats \ 4 replies \ @Fiatrevelation OP 15h

I really appreciate that your high level of cynacism is backed up by an extraordinary amount of pow in building lightning.pub.

no different than using a custodial wallet to save and buy a channel when ready,

It's this line of thinking that led me to ask these questions. Unfortunately it feels like lightning relies overwhelmingly on such 'custodians'.

11 sats \ 3 replies \ @justin_shocknet 15h

lightning relies overwhelmingly on such 'custodians'

Not so much Lightning itself, but yes Lightning users certainly do... it's extra unintuitive steps to avoid the LSPs... you can always just fund an outbound channel to another node directly if you know what you're doing and are inclined to do it.

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11 sats \ 4 replies \ @DarthCoin 15h

There are 2 types of "0-conf" channels:

those that are like the Olympus is using for JiT and are confirmed onchain, but you can use them instantly even before the 1st confirmation. These are used for an easy onboarding new users.
those that are never broadcast and confirmed, but these should be used only with trusted peers, or to yourself, your own nodes. https://github.com/lightningnetwork/lnd/blob/master/docs/zero_conf_channels.md

10 sats \ 3 replies \ @Fiatrevelation OP 14h

So they are broadcast, as a channel-open usually is, but you don't have to wait for the 3 block confirmation before using them. I'm guessing the wrapped invoice includes the channel open fee, paid for by the sender?

11 sats \ 2 replies \ @DarthCoin 14h

Yes, in Olympus case is 10k sats (channel lease) + opening onchain fees + reserve channel https://docs.zeusln.app/lsp/fees

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