Where is the Light(ning) in the Taproot Dawn? Unveiling the Bitcoin Lightning (IP) Network

Abstract

Proposed in 2016 and launched in 2018, the Bitcoin (BTC) Lightning Network (LN) can scale-up the capacity of the BTC blockchain network to process a significantly higher amount of transactions, in a faster, cheaper, and more privacy preserving manner. The number of LN nodes has been significantly increasing since 2018, and today there are more than twelve thousand nodes actively participating of so-called LN payment channels. The upcoming Taproot upgrade to the Bitcoin protocol would further boost the development and adoption of the LN. Taproot is the most significant upgrade to the Bitcoin network since the block size increase of 2017, and it will make LN transactions cheaper, more flexible, and more private. We focus on the characterization of the LN network topology, using network active measurements. By crawling the underlying P2P network supporting the Bitcoin LN over a span of 10-months, we unveil the LN in terms of size and location of its nodes as well as connectivity protocols, comparing it to the P2P IP network supporting the BTC blockchain. Among our findings, we show that IP addresses exposed by LN nodes correspond mainly to customer networks, even if most BTC nodes are actually deployed at major cloud providers, and that LN nodes significantly rely on anonymized networks and protocols such as Onion, with more than 40% of LN nodes connect through Tor.