Latency and Privacy in Lightning

The discussion revolves around the critical balance between enhancing privacy and managing performance within the Lightning network. A significant concern is raised regarding the proposal to introduce forwarding delays in payment processing. Such delays, while potentially beneficial for privacy, pose a risk of exacerbating existing performance issues. The impact of these delays is twofold: they not only slow down the successful completion of payments by adding time per hop but also extend the duration to resolve failed payment attempts. This is particularly problematic given the nature of routing in the Lightning network, which depends on trial-and-error methods. Failed payments, including both legitimate transactions and probing attempts to enhance future reliability, are expected and common. As the network grows, the frequency of these failures is likely to increase exponentially, leading to compounded issues related to liquidity locking and the availability of HTLC slots for routing nodes.

The concept of introducing delays raises another point of contention: the lack of incentives for routing nodes to adhere to such rules. Since routing nodes play a crucial role in the network's functioning, their cooperation is essential for any proposed changes to be effectively implemented. However, the suggestion lacks a compelling incentive for these nodes to adopt forwarding delays, as it primarily serves privacy-focused goals without addressing the broader needs of the network.

An alternative solution proposes applying delays at the source and destination points rather than across every hop in the payment chain. This approach offers several advantages over the initial proposal. Firstly, it allows users to opt-in, giving them control over their desired level of privacy and performance trade-off. Secondly, it avoids the need for protocol changes, making it easier to implement and adapt. Lastly, for receivers, this method ensures that payments can still be considered successful despite the introduction of delays in HTLC fulfillment. This strategy seems to offer a more balanced and practical way to address privacy concerns without significantly harming the network's performance.