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If so, that would make it possible for that same node to have 1 very well funded inbound channel with only 1 other node that they also own and price gouge fees to route payment to them through this one connection.

For example, let's say that the company is a major financial institution, service provider or retailer with a high market demand. The company then creates a Lightning node (call this node A), and node A has only 1 inbound channel for billions of USD in SATs with only 1 other node (node B) on the network, which the company also owns/controls. The company then forcibly denies all incoming open_channel requests to node A, and only allows and/or advertises connections with node B. Users then have to connect to node B to route payments to node A for products or services. The company then jacks up the fees to route through node B forcing all users that send money to them to go through node B and pay this exorbitant price. Since the company is very widely used and popular in the market, demand for their services is high. Thus, consumers would be forced into paying a crazy fee until a competing service enters the market. Given the large amounts of capital available to this company, the cost of closing / opening a channel between the nodes is not a large concern give how cheap that on-chain txn is in comparison to the profit in fees.

Is this scenario possible? If so, is anything being done to mitigate it? If not, why? What would prevent a company from doing this other than bad publicity?

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Yes, it is technically possible.

But it seems to be more of an economic question rather than a technical one. Ultimately it is answered by the question: "how high a fee are buyers ready to pay?".

This has nothing to do with Lightning, or Bitcoin in particular. Hidden fees are everywhere.

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  • Thanks for your answer. I guess I was more so curious about a node's ability to proactively (rather than reactively) prevent other nodes from opening channels directly to it using LND or c-lightning. The economic scenario was simply an example to highlight the potential negative outcome of that functionality (if it exists) and to inquire about a potential fix to avoid that scenario. I suppose I'll go look deeper into the LND and c-lighting codebase for that answer.
    – bry
    Sep 5, 2021 at 14:15
  • This functionality does exist. But you can't have a technical "fix".
    – Antoine Poinsot
    Sep 5, 2021 at 14:31
  • I see. Well thanks so much for your helpful and insightful responses.
    – bry
    Sep 6, 2021 at 20:04

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