The Lightning Network is viewed by many in the Bitcoin community as the network’s best hope for long-term scalability. The concept uses payment channels to perform bitcoin transactions off-chain, with the blockchain acting as a sort of backup court system for situations where someone decides not to play nice. The creators of this system for instant micropayments estimate that it could eventually be used to process billions of transactions per second.
While a combination of smart contracts and game theory are used to make sure the system works properly for everyone, Bitcoin Core contributor, Peter Todd, explained a possible failure mode of the Lightning Network at the Bitcoin in Use conference late last month.
Editor’s note added at 1:11 EST: The failure mode discussed in this article has been known since the early development of the Lightning Network and is discussed in the white paper. This article is not an attempt to give Peter Todd credit for discovery of the failure mode; he simply provided an overview of the issue during a recent talk.
The Lightning Network’s Failure Mode
The Lightning Network failure scenario described by Todd, takes place when a large number of people on