Good morning Mr. Lee,

> Sorry. Re-sending with correction to CC bitcoin-dev
> I am sorry if this was already brought up in previous threads. If I know
> lightning network correctly then HTLC is used to enforce settlements on
> blockchain if there is a dispute. Could a person lose money if their HTLC
> does not get confirmed in the timeframe or if an older HTLC gets
> confirmed first? I see different ways this could happen.
> One, if the blockchain is very saturated with other transactions. The
> reason we need lightning network is why it might have troubles with
> settlements?

This could happen, but the entire exercise is to move transactions off the 
blockchain, precisely to lower this risk.

Otherwise, transfers onchain will take a long time.
In practice, a long time to settle a payment will invalidate many real-world 
economic exchanges anyway (consider paying for food at a restaurant --- if your 
payments take days to settle, the food has gotten stale before the restaurant 
receives payment and releases your food).
Thus, if an onchain transfer takes a long time to settle, there is already risk 
of economic loss present.

By moving activity offchain, we reduce pressure onchain and improve settlement 
speeds on both offchain and onchain, reducing risk of economic loss due to 

> Two, competition from a different conflicting HTLC. A newer
> HTLC might not get confirmed before an older HTL.

I cannot make sense of this.

You cannot create conflicting HTLCs.
Either you have some free money to create an HTLC, in which case there is no 
possible conflict with an existing HTLC (the fund is reserved for HTLCs, or it 
is yours without further encumbrance).

Thus it is not possible to create a conflicting HTLC in any case: either you 
have funds (that are not already in an HTLC) to fund an HTLC and that HTLC 
cannot conflict with existing ones, or you have no funds and a new HTLC cannot 
be created until one of the HTLCs is resolved one way or another.

> Three, denial of service
> the lightning router so they never have a chance to send a settlement

This is possible, but only that node risks loss.

The reason why unilateral close is always possible is to handle the case where 
a routing node comes offline.

If you have offered an HTLC to a routing node, you retain a timelock branch 
back to you (the "T" in HTLC).

If the routing node goes offline past the timelock in the HTLC, then you 
unilaterally close the channel and drop the HTLC onchain.
This is what lets you recover your funds.

> I found out about a recent attack technique that sounds like it might be
> similar called "flood and loot".

Roughly, my understanding of Flood and Loot is to make a lot of uneconomically 
tiny HTLCs going through a target victim forwarding node.
You make circular routes going from your own node back to yourself.
Then you refuse to actually claim the HTLCs sent back to yourself.

Then you go offline.
This means that the only way for the forwarding node to recover its funds is to 
drop the channel(s) involved onchain.
But if the HTLCs are many and tiny, they are simply too uneconomic to claim 
onchain, so they just lose the channel funds as fees.

> Is this a concern on lightning network?

Work is being done (anchor commitments) to mitigate the effects of onchain fees 
on Lightning.

> I humbly say that I do not fully
> understand all of lightning network yet. I am working to grasp the idea.
> These are questions I look to find answer for. Another question I have. I
> did read the paper Scalable Funding of Bitcoin Micropayment Channel
> Networks. Would channel factories be better and eliminate my concern?

They would not.
Ultimately, your "final defense" is to drop the entire construction onchain 
until you reach the HTLCs and you can have the blockchain enforce the HTLC 

It would *help* to reduce blockchain bloat by reducing the size of transactions 
to create multiple channels, and thus also secondarily helps reduce onchain fee 
pressure and also reduce Flood-and-Loot (which is basically a layer-crossing 
attack, taking advantage of lower-layer fees to create attacks on higher 

But always the underlying problem remains: security costs something, and you 
have to pay for protection on the Internet when transacting with potentially 
untrusted (and untrustable) entities.
It seems unlikely that "security costs something" can be eliminated.
One can consider that modern-day state-imposed taxation is paying for security, 
for instance, of traditional face-to-face transactions.
With Bitcoin, you can choose to either transact and pay for security, or not 
transact and forgo what you would have bought.
With some tradeoffs, you can pay by other means that may be cheaper for you.

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