BitMEX Research: Lightning Node “Justice Transactions” Deterring Bitcoin Thieves

Michael LaVere
  • BitMEX Research examined "justice transactions" on lightning network, which deter bitcoin thieves. 
  • Found 241 examples of justice transactions, worth 2.22 btc, since the launch of LN in 2017.

A new BitMEX report claims that bitcoin’s lightning network has deterred the possible theft of 2.2 btc thanks to “justice transactions.”

Lightning Network

The research wing of cryptocurrency exchange BitMEX published a new report on July 15 examining the features of bitcoin’s lightning network. In particular, the report focused on so-called “justice transactions,” which involves a punishment mechanism to close channels in the event of suspected foul play.

BitMEX identified 241 justice transactions, worth 2.22 btc, since the launch of lightning network in late 2017.

he Lightning network has been designed with channel closures and incentives to deter dishonest nodes from stealing funds. 

The report states, 

“It should be noted that, by design, when a thief attempts to steal funds on the lightning network, if caught, they do not only lose the money they tried to steal, they lose all the funds in the relevant channel. This “punishment” is expected to act as a deterrent and is sometimes called “justice”.

Monthly justice transactions reached their peak in October 2018. However, due to the rising price of bitcoin throughout this year, the total value redeemed by justice transactions was much higher in February and March 2019. 

Deterring Thieves

BitMEX reports that the 2.22 btc redeemed in justice transactions is the combination of total funds claimed from dis-honest nodes in addition to the value that was attempted to be stolen. 

The research also concludes that the actual number of justice transactions may be inflated relative to the number of attempted thefts, in part due to users experimenting with lightning network, 

“It is also possible that many of the 241 justice transactions do not indicate genuine dishonestly, for instance it could be users testing the system, where the same user owns both lightning nodes in question. For example BitMEX Research is responsible for 5 of the 241 justice transactions, when there was no victim, as BitMEX owned all the nodes and funds.”

While lightning network has yet to reach the capability of mainstream adoption, it offers the potential for faster and cheaper bitcoin transactions. BitMEX claims that the justice mechanism is necessary for deterring and preventing theft on the platform, and will ultimately contribute to the system as a reliable and scalable payment system. 

The research team concludes that there is a “reasonable degree of justice” on the nascent lightning network. 

A Glimmer of Hope Emerges As Bitcoin Price Rises Above $8,100

Siamak Masnavi

On Wednesday (November 20), despite the prevailing "risk-off" sentiment (due to the current state of the trade talks between the U.S. and China), Bitcoin is managing to stay above the $8,100 level.

According to a report published in TheStreet at 09:30 EST (14:30 UTC), shortly after the U.S. markets opened on Wednesday, the Dow Jones Industrial Average (DJIA) was falling "after China condemned a U.S. Senate resolution supporting human rights in Hong Kong, while President Donald Trump threatened to boost tariffs if Washington and Beijing are unable to negotiate a near-term trade agreement."

Per data from CryptoCompare, although Bitcoin started this day at $81,17, by 10:20 UTC, it had fallen to $8,062. However, since then the price has recovered, and Bitcoin is currently trading at $8,138, up 0.58% in the past 24-hour period:

BTC-USD 24-Hour - 20 Nov 2019.png

Bitcoin's market cap is currently around $146 billion, and Bitcoin's market cap dominance is just above 66%.

One interesting Bitcoin-related tidbit that came out today has to do with the crypto holdings of Dan Schulman, the CEO of PayPal.

He was asked during an interview with Fortune the following question: "Do you personally own any cryptocurrencies?" He answered: "Yes. Bitcoin." The follow-up question was: "Only Bitcoin?" Schulman replied: "Yes."

In other Bitcoin-related news, on Tuesday (November 19), the New York State Department of Financial Services (NYDFS, aka DFS) announced that it had granted a charter under New York Banking Law to Fidelity Digital Asset Services, LLC (FDAS) to "operate as a limited liability trust company as part of the state’s rapidly growing virtual currency marketplace." 

Linda A. Lacewell, the Superintendent of NYDFS, had this to say: 

DFS will continue to provide regulatory oversight of new technologies to both foster innovation and protect consumers, companies, and markets. This approval is further evidence that innovation and consumer protection can coexist in New York’s evolving and expanding financial services industry.

NYDFS's press release mentioned that FDAS had been authorized "to provide a virtual currency custody and execution platform, on which institutional investors and individuals can securely store, purchase, sell, and transfer Bitcoin."

Michael O’Reilly, Chief Operating Officer for FDAS, stated:

The custody and trade execution services that we provide are essential building blocks for institutional investors’ continued adoption of digital assets. The designation as a New York Trust Company under the supervision and examination of the DFS builds on the credibility and trust we’re establishing amongst institutions and other market participants.

 

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