On September 18, a Redditor posted to the r/bitcoin forum and explained how he discovered a way to “attack [the] lightning Network’s custodial services.” The Reddit account dubbed “Reckless Satoshi” wanted to figure out if a “discrepancy between real routing fees and service’s transaction fee can be exploited for a profit.” The researcher disclosed that he wanted to see how large the damage could be and said “it is bad.”
6 Lightning Network Custodial Services Attacked, Researcher Discloses Findings to Offenders Prior to Public Disclosure
A Redditor called Reckless Satoshi published a disclosure post on r/bitcoin this past Saturday and disclosed how he had found a vulnerability with routing fees and some of the Lightning Network’s custodial services. The research attack was done in good faith and after it was complete he disclosed the bugs to the offending services before publishing his findings. Reckless Satoshi used the Lightning Network (LN) attack on six different services including Bitfinex, Muun, Okex, Lnmarkets, Southxchange, and Walletofsatoshi.
Reckless Satoshi said the attack was “cheap, but not free,” and a “simple attack.” After depositing funds into the custodial services, Reckless Satoshi used “a node that will be routing the payments between the custodial service and the receiving node.”
“If a positive net return is possible, then it is just a matter of optimizing the size of the fee collected and the transaction speed rate to see how big the damage could be,” Reckless Satoshi added. “It is easy to see how this attack must be feasible on any service with [a] free withdrawal fee.”
Reckless Satoshi also published his attack to the code repository site Github. After explaining how he placed a node in the middle, the researcher added:
This is one of the simplest attacks. In fact, the only LN attack I can think of, but also I am just a newbie in the process of learning. I assume there are people out there much more capable of conducting this research. Who knows, maybe there have been sizable losses in the past that remain undisclosed.
Lightning Network Total Value Locked at $112 Million, Up Over 100% Since the End of July
The visitors who read Reckless Satoshi’s forum thread thanked him for conducting the research and disclosing the bugs to specific custodial LN providers. “I’m glad to see that people are not hacking/exploiting the system just for malicious purposes or to make quick profit out of it,” an individual wrote in response to the disclosure. Moreover, a number of Redditors discussing Reckless Satoshi’s findings argued over what they should call the attack.
At the time of writing, the Lightning Network has seen its total value locked (TVL) slide by 9.3% during the last 24 hours. However, since July 20, 2021, the LN TVL jumped over 100% from $56 million that day to today’s (2,600+ BTC) $112 million TVL held in the Lightning Network. Much of the 9.3% TVL slide on LN is due to the recent crypto market rout on Monday morning, September 20, as the crypto economy has slid 9% in value during the last 24 hours.
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