Can Phoenix wallet steal my funds?

Question

Phoenix wallet is a great UX Lightning Wallet, and they're able to deliver that UX by making a few different tradeoffs. None of those tradeoffs involve them owning your private key, but in their 2019 blogpost they write:

Phoenix only connects to ACINQ nodes. This allows us to modify/enrich the Lightning protocol at the immediate peer level, while staying 100% LN compliant at the network level.

Since I'm only connecting to ACINQ nodes, could ACINQ (the corporation) theoretically use their nodes to say I'm "cheating", thereby forfeiting my LN🗲 BTC?

Thanks!

Answer 1

If you can verify that Phoenix is running the code that you expect - the open source eclair implementation of the Lightning Network and Phoenix wallet - then they will not be able to use their node to "say that you're cheating". This is because they do not have signatures for your unique commitment transaction, so there's no chance that they can broadcast your commitment and then claim the penalty for themselves.

More generally, mobile wallets that depend on their channel peer for blocks could theoretically cheat their peers by broadcasting old state and then withholding blocks until the time that your node has to claim the penalty output. Phoenix has an option to connect to your own electrum server, which would protect you against this (unlikely) attack if you chose to enable it.

Answer 2

Since this is a hypothetical question it is hard to give a definite answer. So unfortunately I have to write both yes and no. But let me elaborate:

Yes, because if you use phoenix which is software by ACINQ and connect to their node controlled by them. Very theoretically there could be a deliberate problem with phoenix wallet trying to cheat if connected to acinq node so that acinq could punish you. That would however mean that the wallet on your phone is deliberately malicious. Of course any software vendor hast the ability to inject malicious code into the software they provide. As far as I know Phoenix is open source so such a malicious code should be detected by the community.

No, because they way how you ask is not how the penalty mechanism works: You don't get the funds by saying that you are cheating. (If that was the case the protocol would be very unsafe as any node could on any channel just claim the partner has cheated and get the money) You're wallet would actually have to verifiably cheated for the ACINQ node to be able to make that claim successfully. The protocol adoptions that phoenix wallet makes - to the best of my knowledge - are nowhere close to cheating attempts.

Thus as long as phoenix is not malicious I don't think the node that you connect to can forfeit your Bitcoin by making a claim that you cheated.