Digital forensic implications of collusion attacks on the lightning network

Abstract

The limited size of a block in the Bitcoin blockchain produces a scaling bottleneck. The transaction scalability problem can be addressed by performing smaller transactions off-chain and periodically reporting the results to the Bitcoin blockchain. One such solution is the Lightning Network. Bitcoin is employed by lawful users and criminals. This requires crimes against lawful users as well as the use of Bitcoin for nefarious purposes to be investigated. However, unlike Bitcoin, the Lightning Network enables collusion attacks involving intermediate nodes and recipients. In such an attack, regardless of a sender’s actions, money is received by an intermediate node that colludes with a dishonest recipient. Since the dishonest recipient does not “actually” receive the money, it does not provide the goods/service to the sender. Thus, the sender pays for the unprovided goods/service, but the recipient can prove that the payment was not received. This chapter discusses the forensic implications of collusion attacks with regard to lawful users because no discernible traces of attacks remain, as well as for law enforcement, where the attacks can target parties as a form of forfeiture, analogous to law enforcement “sting” operations. This chapter also discusses the potential of the Lightning Network to be used for money laundering activities.