Cross-Layer Deanonymization Methods in the Lightning Protocol
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Payment channel networks (PCNs) have emerged as a promising alternative to mitigate the scalability issues inherent to cryptocurrencies like Bitcoin and are often assumed to improve privacy, as payments are not stored on chain. However, a systematic analysis of possible deanonymization attacks is still missing. In this paper, we focus on the Bitcoin Lightning Network (LN), which is the most widespread implementation of PCNs to date. We present clustering heuristics that group Bitcoin addresses, based on their interaction with the LN, and LN nodes, based on shared naming and hosting information. We also present cross-layer linking heuristics that can, with our dataset, link 43.7 of all LN nodes to 26.3 cross-layer links allow us to attribute information (e.g., aliases, IP addresses) to 17 deanonymization. Further, we find the security and privacy of the LN are at the mercy of as few as five actors that control 34 nodes and over 44 capacity. Overall, we present the first quantitative analysis of the security and privacy issues opened up by cross-layer interactions, demonstrating their impact and proposing suitable mitigation strategies.
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