Lightning Network (LN) was originally conceived as a means of making BTC payments instant and almost free of charge. At the same time, LN can be utilized as a decentralized cross-chan exchange system. Recently, however, the developers have found a flaw in its cross-chain functionality.
Though mostly associated with Bitcoin, Lightning Network add-on is applicable to any blockchain featuring compatible basic functionality. Lightning transactions have already been successfully tested on Litecoin and Vertcoin networks.
Should the LN functionality be available on more than one blockchain, this will allow for instant decentralized token exchange by means of payment routing through third-party users who store the coins of the types needed for such exchange.
Unfortunately, this theory divorced from the reality, as one of the Lightning Network developers Corné Plooy had found out. The essential problem is that the parties to LN payments are able to delay BTC-to-LTC exchange for 24 hours or so, while monitoring the exchange rate at the same time.
A user will then be able to either finish or cancel the transaction depending on the exchange rate fluctuation. Thus, a user can earn money by just cancelling loss-making transactions and accomplishing only profitable ones.
Such a flaw may potentially befall the whole idea of cross-chain LN transactions. This is why Plooy came up with alternative solution to this problem. He believes that third parties storing coins on both blockchains in question could compete with each other on fees, trustworthiness (not doing the delay attack on their users), and other features. The need to preserve one’s reputation as an exchange provider on the Lightning Network should limit the proliferation of this attack.