Research is underway. Experiments are being prepared. Behind the scenes, the developers of Lightning Network plan (possibly) to completely rewrite a significant part of bitcoin .

Known as the second layer of Bitcoin , since most actions take place outside the blockchain, Lightning is designed for faster, cheaper, and more scalable Bitcoin payments . The network is functional today, but it turns out that it might be wise to remove a large part of it and replace it with new technology to strengthen confidentiality.

Hashed Timelock (HTLC) contracts are an integral part of the Lightning network, allowing payments to be sent without trusting anyone. Now, developers are considering replacing them with Timelock Point contracts (otherwise known as "payment points" or PTLC), which can do the same thing, they say, only better. 

The idea was first proposed by the pseudonymous developer of Lightning ZmnSCPxj, ​​whose open source development work is sponsored by Square Crypto, an R&D branch of the unicorn of payments in Silicon Valley.

At the forefront of exploring this improvement, Suredbits developer Nadav Kohen, who started studying the idea because he was interested in the possibilities of bitcoin smart contracts , which describe more complex conditions required before payment can be made, such as requiring a certain date to have passed, or requiring that the temperature be somewhere above, say, 90 degrees.

"I have spent a lot more time digging into what can be done using PTLC which cannot be done with HTLC and it turns out that you can make quite complicated contracts without losing confidentiality and speed provided by the Lightning Network, ”says Kohen. "And in addition, many existing proposals related to Lightning can become even more powerful and improved when using PTLC."

While the Lightning Network is still relatively young, developers are finding new and better ways to build it from scratch. For example, Eltoo, if implemented, will also be a fundamental change for the network.

New possibilities

The Lightning Network is a global payment system made up of at least 12,000 nodes.

When someone sends a payment, under the hood, they jump from one node to another until they reach the destination. All of this most likely happens in a fraction of a second. The way payments move through the system without trusting the nodes through which the user passes his bitcoin is through HTLC.

HTLCs are so named because each node in a payment path receives a "hash", a chain of letters and numbers of random appearance, which hides the secret that can be used to recover bitcoin .

One problem with HTLC is that all of the middlemen on the way get the same hash, which can be a privacy issue, as it gives spies a better idea of ​​where a source is coming from or where it is going. payment.

"If I tried to monitor payment activity on the Lightning network, I could configure a bunch of routing nodes and if I route two payments to two different places that have the same hash, I can be sure that these two payments were on the same route, which significantly reduces the potential senders and recipients of this payment, "said Kohen.

PTLC, on the other hand, can add a “random hit” to each jump, said Kohen, making it more difficult to say that they are part of the same payment path. (Those interested in the technical elements can read Kohen's series of technical explanations.)

This is the reason why Kohen believes that the change is "necessary" for Lightning.

The developers have tried to improve the privacy of Lightning as much as possible. Bitcoin is fairly transparent because each transaction is recorded in a public repository. Lightning Network's "off-chain" transactions could be promising to change that, as payments are not indelibly printed in the Bitcoin blockchain .

As a bonus, the PTLC also opens up other possibilities. They incorporate certain protections against "wormhole attacks", used by malicious actors to sneakily plunder fees that are supposed to be paid at intermediate nodes, Nadav explained in his article.

And useful information can be stored in a PTLC, making it a possible tool for more complex smart contracts.

"Specifically, there is very little useful information in a hash, while there is important information that can be stored in a point," said Kohen. 

In this way, PTLC could be used for escrow, for example, or for "oracles," a hot topic in cryptocurrency, where payments depend on data from the outside world.

Waiting for "Schnorr"

Kohen and others are actively studying the change and its potential impact, but it will take some time before the developers can make the change.

Technically, the change could be added to Lightning now. During a Lightning virtual hackathon last month Kohen, the engineer Nick Jonas Blockstream and others have created a proof of concept on the digital signature algorithm for elliptic curves (ECDSA). 

Kohen argued that the change is "the best" if it is built on Schnorr / Taproot, a likely upgrade that has not yet made its way into bitcoin . Schnorr / Taproot offers a new way to "sign" bitcoin transactions , this is how a user cryptographically proves that he owns bitcoin and that he is authorized to transfer it to someone else. Schnorr / Taproot offers advantages over the current Bitcoin ECDSA signature scheme .

With Schnorr not ready yet, Kohen and others only plan to use the ECDSA version to experiment with PTLC in a sandbox so that once Schnorr moves, they are ready.

“Aside from theory, there is finally a way to experiment now. I really can't wait to finally see all of these proposals that were only formulated on paper, "said Kohen, adding:

"I do not intend that the current coding work that has been done using the ECDSA adapter signatures is found in the actual production of a Lightning implementation, but rather I intend to use the ECDSA adapter signatures to test the large set of propositions that require PTLC, as well as to try to hit the pain points that are not specific to ECDSA-based PTLC, so that we can have as much advance as possible before Schnorr arrives and it's time to commit to a way of doing lightning PTLC. “

Coordination

But the stages do not stop there. Once Schnorr is over, the change will require a lot of coordination.

The good news is that the developers of Lightning Kohen have spoken to agree that the change should be made. So far, there has been a die fighting on implementation details.

"I have not yet spoken to a single person who does not believe that one day ... Lightning will surely switch to using PTLC instead of HTLC. I have met people who disagree on various implementation details, but I have never met anyone who does not think that PTLCs are inherently superior to HTLC without real inconvenience, "said Kohen .

But even with the agreement that the change will improve the lightning network, it is a huge change that will take time. 

"Rather than" a few changes, "this would be the biggest enterprise-level update to date on the Lightning network," said Olaoluwa Osuntokun, CTO of Lightning Labs in an email discussing change with other developers.

"I advise you not to underestimate the time it will take in practice and the degree of synchronization required for everything to go smoothly," he added.