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A research and development laboratory at the encrypted startup TenX has tested the use of its cross-blockchain interoperability protocol to transfer ERC20 tokens for Bitcoin (BTC) using the Lightning (LN) network. The news was reported on the blog of the CoBlox R & D laboratory today, December 12, referring to the December 7 demo.
As outlined in the blog post, the technical challenge was to exchange ERC-20 tokens – which run on the Ethereum platform (ETH) but are not strictly "natives" because they are based on an intelligent contract to transfer ownership – for the smallest transportable Bitcoin unit, known as "Satoshi", using the second level scalability LN protocol.
Lightning Network is a second-level solution to the scalability problem of Bitcoin, which uses Hashed Timelock Contracts (HTLC) to open payment channels between users who keep most of the transactions out of the chain, moving to the underlying blockchain only to record the results net.
CoBlox's previous Ethegoum HTLC, as the today's post explains, was significantly simpler as it involved native resources. CoBlox outlined their approach to finding a solution for an ERC20 case, stating that the developers decided to "split the HTLC installation into two transactions" – "contract implementation" and "transfer ERC20" – but that they could not combine the two steps.
The post writes:
"The ERC20 transfer function uses msg.sender for authentication, however, calling the transfer from a contract distribution sets msg.sender to the address of the contract yet to be distributed which obviously has no tokens!"
The post goes on to note that using "the Lightning network for an atomic exchange also has its whims", since the solution is based on users who create invoices and pay them without necessarily "knowing the underlying HTLC". However:
"An atomic exchange can not always be expressed through this model of invoices and payments.In LND, which is what we used for our PoC, receiving a payment requires an invoice that requires knowledge of the secret.As a result, we have been in can only run ERC20 on Lightning and not vice versa. Below is the invoice used in the swap. "
CoBlox states that it is still "looking at ways" to solve the problem of limited directionality, and therefore did not include the results of its proof-of-concept (PoC) for ERC20 tokens as part of the open source release of its COMIT network.
Last summer, a study conducted by the weekly crypt Diar suggested that the Lightning network may not be as effective in routing payments as is believed, particularly when it comes to larger amounts. The report was rejected by the LN development team as "poorly studied and written," with all the details of their criticisms outlined in a Cointelegraph analysis.
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