delvingbitcoin

Ephemeral Anchors and MEV

Ephemeral Anchors and MEV

Original Postby instagibbs

Posted on: January 9, 2024 14:30 UTC

The blog post begins by addressing a nuanced aspect of the Lightning Network, specifically concerning the handling of Hash Time Locked Contracts (HTLCs).

It is noted that there exists an odd incentive structure within the current framework. This structure allows a counter-party to potentially finance their unilateral close through circular routing schemes, choosing to settle on-chain rather than resolving outstanding HTLCs. The introduction of Child Pays for Parent (CPFP) fees adds another layer of complexity due to free-form fields like potential payments, presenting challenges to maintaining the integrity of the system in line with the existing Lightning Network specifications.

Furthermore, the discussion highlights broader implications for Layer 2 (L2) contracts which permit the transfer of amounts that are unclaimable on-chain, suggesting that they would encounter similar problems. A proposed alternative involves the concept of donating the trimmed HTLC value to the community. This could be achieved via an OP_RETURN burn, which would incur an additional data cost of 10 vbytes. While this method might offer improved incentives, it is also recognized as being more wasteful on average, deterring its serious consideration.

Lastly, the post delves into concerns regarding miner extractable value (MEV) and denial-of-service (DoS) prevention measures. Specifically, it outlines the risk posed by the absence of anti-MEV checks in conjunction with bip125 rule3. Without these checks, the entity that spends the ephemeral anchor first can increase the required transaction size without jeopardizing their funds. This could happen even in scenarios where a straightforward burn would suffice for inclusion in the upcoming block, thereby exacerbating the potential for gaming the fee market.