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hodl-invoice.md

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Hold Invoices

Overview

A hodl invoice (or hold invoice) is an implementation extension to a Lightning Invoice where the final step of an HTLC resolution is withheld by the payment receiver, such that the payment sender is fully committed, and cancelled or executed conditionally at a later time.

A hodl invoice is not distinguishable from a normal one to a payment sender other than it will have a longer-than-normal expiry parameter.

Details

Successful HTLC resolution in a payment channel is complete when a payment receiver exposes a preimage that hashes to a payment_hash of an Invoice and withdrawing the locked funds. When a sender's funds are committed there is no option but to wait until hashlock resolution (completing the payment) or timelock tl expiration (canceling the payment). By setting a long enough tl, a payment receiver has the option to withhold (or cancel) resolution after funds have been committed until a time t such that t < tl, otherwise tl expires (t >= tl) and funds are returned back to the sender. The conditions by which the receiver settles or cancels the invoice can be arbitrary or cryptographically conditional (ie. the receiver does not know the preimage and must obtain it to settle the payment).

Use Cases

Simplified Merchant Returns

Return processes for settled purchases of out-of-stock inventory can be cumbersome. A merchant could use a hodl invoice to only accept payment after it has verified the inventory is in stock, or instantly refund the purchaser otherwise.

Fidelity Bond

A user gains access to a service by paying a hodl invoice. If the user is malicious the service settles the invoice, otherwise it is canceled when the user is finished and funds return to the user.

Atomic Item Delivery Payment

Consider an item delivery Shop, a Customer could generate a hash of a preimage and send it to the Shop. The Shop generates an invoice with payment_hash equal to hash and Customer pays it, however the Shop cannot settle it without preimage. Upon item delivery the Customer reveals the preimage to the Shop Courier who then settles the invoice.

Atomic Multi-party Item Delivery Payment

Consider an item Shop, an independent Courier, and a shop Customer:

  • Customer generates a preimage and sends hash of preimage to the Shop
  • Shop creates hodl invoice invoice0 and Customer pays it
  • Shop sends hash to the Courier who creates another hodl invoice invoice1 (for delivery costs) with the same payment_hash and Shop pays it
  • Upon delivery the Customer gives the preimage to the Courier who settles invoice1 revealing the preimage to Shop who then settles invoice0.

Submarine Swap Variation

  • Alice creates a preimage and sends hash to Bob
  • Bob creates a hodl invoice with payment_hash equal to hash
  • Alice pays the hodl invoice
  • Bob creates an on-chain HTLC with hashlock equal to hash and funds it
  • Alice uses preimage to sweep funds from the on-chain HTLC
  • Bob uses revealed preimage to settle the hodl invoice

Caveats

Reusing a payment_hash across multiple invoices to create conditional payment chains incurs risk for all parties receiving the preimage after it has been revealed once as intermediate nodes on mutual payment paths will access the preimage that can be used to claim funds before the respective HTLC resolution is complete, thereby potentially blocking settlement by the hodl invoice holder.

Key People

References

  1. LND pull-request
  2. The Lite Podcast with Joost Jager.