Enabling Threshold Custody for the Lightning Network with Nested Threshold Multi-Signatures

• URL: http://arxiv.org/abs/2608.20705v1
• Date: Fri, 21 Aug 2026 03:20:09 GMT
• Title: Enabling Threshold Custody for the Lightning Network with Nested Threshold Multi-Signatures
• Abstract summary: We present Iceberg, a new cryptographic primitive for thresholdizing one participant inside a multi-signature protocol.<n> Iceberg enables one side of a Lightning channel to operate as a $t$-of-$n$ threshold group while appearing to the counterparty as a standard MuSig2 participant.<n>Our measurements show that thresholdizing a Lightning channel incurs only modest overhead, since a threshold group tolerating one corrupted member sustains over $93%$ of the payment throughput of an unmodified endpoint.
• Score: 0.71747343065587
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: The Bitcoin Lightning Network secures hundreds of millions of dollars, yet channel endpoints rely on vulnerable single online keys. Although threshold signatures are routinely used to protect on-chain Bitcoin, no practical deployment has been possible for Lightning channels. This is because thresholdizing a Lightning party requires nesting a threshold signature scheme inside of an established two-party MuSig2 protocol without altering its nonce exchange or message flow. In this work, we resolve this limitation by formalizing nested threshold multi-signatures, a new cryptographic primitive for thresholdizing one participant inside a multi-signature protocol. As an instance of this primitive, we present Iceberg, the first construction for nested threshold MuSig2 signatures. Iceberg enables one side of a Lightning channel to operate as a $t$-of-$n$ threshold group while appearing to the counterparty as a standard MuSig2 participant. As a result, threshold custody can be deployed unilaterally on today's Lightning Network without requiring any modifications to Bitcoin, the Lightning protocol, or channel counterparties. We prove the security of Iceberg, integrate a prototype into a production Lightning node, and benchmark its performance. Our measurements show that thresholdizing a Lightning channel incurs only modest overhead, since a threshold group tolerating one corrupted member sustains over $93\%$ of the payment throughput of an unmodified endpoint.

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