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In following paper (Link to the paper) we read:

"combining Tor and Bitcoin creates an attack vector for the deterministic and stealthy man-in-the-middle attacks. A low-resource attacker can gain full control of information flows between all users who chose to us Bitcoin over Tor. In particular the attacker can link together user’s transactions regardless of pseudonyms used, control which Bitcoin blocks and transactions are relayed to the user and can delay or discard user’s transactions and blocks."

On the other hand, in this answer(Link to the answer) we read:

"in order to maximize your privacy you should run your lightning node on TOR even though the routing of payments is a source based Onionrouting similar to TOR."

  • According to the paper that is addressing an attack on the Bitcoin, How secure is using TOR in Lightning Network ?

  • Does use of TOR in LN increases privacy by hiding the IP address WITHOUT increasing the the proposed man-in-the-middle attack in the paper ?

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The paper you link to when used as advice rather than a scholarly investigation into the tradeoffs of different choices is outright bad advice.

The attacks they give are largely generic and have little to do with tor itself, while use of tor provides non-trivial protection against many other vectors, and if used consistently and exclusively at least prevents linking the users network identifiers with their activity. Almost every security decision is an exercise in tradeoffs when it comes to advice you cannot just consider the risks of one option while pretending the alternatives are riskless.

Moreover, its not uncommon to see this article breathlessly promoted on the same pages that recommend users use lite wallets that simply send all their addresses to remote hosts-- effectively always operating under the worst case possibility the article suggests. If using tor is a bad idea then using, say electrum, is "holy crap why would you ever do that?!" -- yet you don't see that level of promotion against using electrum or similar.

Given the recent rise in promoting it I am concerned that some parties might be sharing it with the express intention of undermining user privacy.

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The Lightning Network does not have the same problems as Bitcoin because all communication is done over an encrypted and authenticated protocol. Lightning Nodes are identified by their public keys, such that communication only occurs between somebody with the matching private key to the public key expected by the connection initiator, making MITM attacks not possible without private key leakage.

The Lightning Network still depends on the Bitcoin network to function correctly though. LN nodes must monitor the blockchain for valid transaction information, so in the case where the Bitcoin node which the Lightning node communicates with is operating over Tor, the attack vector is the same as you have referenced. A node in the Lightning Network will never know whether you are receiving information about bitcoin transactions over Tor though.

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