Hi Ben, On the technical aspects of blinding paths, in the context of CivKit (large-scale peer-to-peer electronic market system), blinded paths could be used by market board themselves to request than makers and takers are going through the lightning node associated with the board to conclude a trade escrow over Lightning.
This is quite an advanced use-case, however this would enable the board to enforce "fair auction" policy during the trade execution (e.g all the takes should send a HTLC to the board lightning node and only the best-bid is forward after a delay), or confidential dealer/breaker role where the board withhold the blinded path from the offer. So I think you have an interesting use-case of blinded paths used to enforce a payment path going through a sequence of client opted-in payment path hops. Especially when coupled with attribute-based encryption and the ECC-based blinding cryptosystem could be upgraded to something more powerful where the points are committing to things like UTXOs thanks to verifiable encryption). Now, on the legal aspects of your post. Thanks to consider the following information, as information-only and and not professional advice. Ask more to your respective attorney. Coming from an European viewpoint, one has to mention the General Data Protection Regulation Act, which is in vigor in the EU since 2018 (and the core protections still apply for the UK, even after Brexit). This general framework grants strong privacy rights to the data subject (e.g a Lightning HTLC sender) on the burden of data controller and processor. Whether a Lightning routing hop qualifies as a data controller or a processor depends on the collection and retention of personal data by the hop, from my understanding. The personal data definition given by the GDPR is the following: "any information relating to an identified or identifiable natural person" and targets explicitly location data, IP address or online identifier. From my understanding, it is probable that the Lightning payment path falls under the GDPR protection of personal data. As a consequence, a Lightning HTLC sender might be entitled to the set of rights granted to a data subject: right to be informed about data collection (e.g retention, with whom it is shared), right to rectification, right to restrict processing, right to object to processing and few more and a bunch of remedies. The GDPR and other European privacy protection acts can have an extraterritorial application and they have been applied a few times on the operation of US big tech and platforms, including with cases related to OFAC compliance. From my understanding, US-based entities are required to comply with the GDPR when dealing with European personal data, and therefore requesting a Lightning HTLC sender to go through "N" compliant nodes first like you're describing might not have a ground when you're dealing with european Lightning users. Generally, under the GDPR framework, pseudonymization and encryption are regarded as good things, and it's even recommended to encrypt processed personal data of users. Privacy is recognized as a human right under EU laws, and while obviously the Alexey Pertsev / Tornado Cash case throws an uncertainty on the boundaries of this right in the era of cryptocurrencies, privacy for its own sake is rooted in European legal tradition. It should be noted California has its own version of the GDPR, called the California Consumer Privacy Act, which explicitly gives a right to opt-out of sharing their personal information. One might oppose this right to lightning "chain analysis" companies doing "dragnet" collection of data, or at the very least check-and-balance it's used for public interest and not commercial advertising. Few more states have privacy legislation, and a compliance officer would have to notice the privilege and immunities and commerce clauses of the US constitution in the application of compliance. All that said, as soon as you start to think about new regulations and fast-moving technologies like privacy protection acts and Lightning, there is a reasonable area of uncertainty, and one is wise to be conservative. As with all new technology, of course we'll see litigation in the courts during the coming decade on those subjects. Still on the ground of the current state of law of both sides of the Atlantic, I'm confident we'll see a flourishing economy of business and plebs Lightning nodes emerge in those parts of the world. Best, Antoine Le mer. 26 juil. 2023 à 15:56, Ben Carman <benthecar...@live.com> a écrit : > Hi list, > > This is an idea I had the other week about a potential downside of blinded > paths that people should be aware of. > > Blinded paths work by encrypting specific paths to reach the destination > node, and each of these paths have an introduction point. > This has big privacy benefits for the receiving node as they can hide > among an anon set of anyone within X hops of the introduction node (X being > the size of the blinded path). > > However, this can have a potential downside for privacy and > decentralization on the network as a whole. > With blinded paths since you do not know the destination node the only way > to pay them is through one of the given paths. > Because of this, they can be used to enforce that "compliant" nodes are > the only ways to reach a given destination. > > In my experience today you can get away with telling your compliance > officer you will only open channels with people you trust, and we see this > with some regulated businesses today (Cash App & River only open to > sepcific peers). > However with blinded paths we could have a world where not only do they > only open channels to specific peers but they enforce that when paying > them, the payment must go through at least N "compliant" nodes first. > This would make it so the pleb routing nodes of today would be completely > circumvented and users would be forced to route only through large > regulated hubs. > The receiver would be hurting their payment reliability as they are > removing potential paths they can receive from, but this is already the > case for all blinded paths. > > This could hurt sender side privacy as well, since payment reliability > rapidly falls off the more hops that are needed it is likely the sender > would need to be very closely connected the introduction node or any of the > nodes along the blinded path, and if all these compliant nodes are data > sharing they'll be able to track a payment as it happens through the > network just through basic timing analysis. > > My concern is lightning "chain analysis" companies could strong arm > businesses into doing things like this under the guise of making sure you > don't receieve OFAC coins. However, I am not sure if this is a "fixable" > problem and just a trade off we'll have to make to get receiver privacy in > lightning but wanted to put out there for people's opinions/awareness. > > Best, > > benthecarman > > _______________________________________________ > Lightning-dev mailing list > Lightning-dev@lists.linuxfoundation.org > https://lists.linuxfoundation.org/mailman/listinfo/lightning-dev >
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