Centralization Risk

Operating Lightning Nodes requires stable connectivity and sufficient payment channel capacity. To control these prerequisites, a significant portion of presentday LSPs (i.e. Wallets, etc.) have started to cluster Lightning Nodes and build LN-hubs. This approach carries centralization risk. These counterparties act like traditional intermediaries, consequently representing custodial services that come with a high degree of regulatory risk.

Such LN-hubs maintain connectivity and payment channel capacity through their own infrastructure, often without making users sufficiently aware of the custodial setup. Furthermore, current implementations do not make the tracing capabilities for fund allocation, transaction flows, and decentralized cash management operations fully transparent. Therefore, potential fraud in LN-hubs represents permanent counterparty risk.

There are solutions on the market using Bitcoin multi-signatures and hash-time locked contracts for escrow transactions to grow the network and encourage renting and leasing of payment channel capacity. These solutions pool funds using Bitcoin scripts, which perform similar functions to sidechains (i.e. shadow chains) but carry an immanent risk of centralization. Moreover, it is almost impossible for Lightning Nodes of retail users to get access to these businessdriven services as they do not work permission-less but enforce whitelisting of selected nodes according to opaque criteria.

The Plenny experiment, on the other hand, is permission-less and gives access to any Lightning Nodes that comply with the technical specification of the Dapp and the DON.

Plenny addresses trust issues by offering non-custodial solutions enabling Lightning Nodes to control access to their cryptocurrency through their own devices. To mitigate counterparty risk, Plenny does not cluster Lightning Nodes or operate LN-hubs. Instead, it decentralizes transactions over an oracle network and the Dapp.

In support of the notion of decentralization, the Plenny experiment builds on the non-custodial structure of the LN. Furthermore, by leveraging the Ethereum ecosystem, Plenny offers community-driven decentralized cash management. To practically test the potential and usability, checks and balances are introduced through traceability features. It also attempts to demonstrate comprehensive transparency to the community by providing governance parameters for voting.