Latency and Privacy in Lightning

In the realm of routing nodes and their operation, various factors such as slow hardware, suboptimal network conditions, or strategies aimed at enhancing privacy can inadvertently lead to latency in handling HTLCs (Hashed Time-Locked Contracts). Despite these delays not being intentional, routing nodes are not obliged to disclose if any part of the delay was strategic. This ambiguity allows for a layer of complexity in how end-to-end latency is perceived and managed by the sender of the transaction. Senders have the capability to measure the total latency experienced across the route and may choose to penalize nodes that contribute to this delay. However, in the absence of specific hold time information from the nodes, penalties are likely to be distributed evenly across all nodes involved in the routing path.

The decision-making process for individual nodes regarding whether to report their hold times introduces an interesting dynamic into the system. Reporting the delay effectively shifts the onus of blame towards the next node in the route, i.e., the outgoing hop. Conversely, choosing not to report the delay places more responsibility on the previous, or incoming, hop. This mechanism provides nodes with a strategic tool, allowing them to influence how penalties are allocated by the sender based on their reported actions. The intricacies of this system underscore a balance between transparency and strategy within the network, as each node navigates its reporting based on personal or operational interests.