  Hashed Timelock Contract (HTLC) in Lightning Network is susceptible to a
griefing attack. An attacker can block several channels and stall payments by
mounting this attack. A state-of-the-art countermeasure, Hashed Timelock
Contract with Griefing-Penalty (HTLC-GP) is found to work under the classical
assumption of participants being either honest or malicious but fails for
rational participants. To address the gap, we introduce a game-theoretic model
for analyzing griefing attacks in HTLC. We use this model to analyze griefing
attacks in HTLC-GP and conjecture that it is impossible to design an efficient
protocol that will penalize a malicious participant with the current Bitcoin
scripting system. We study the impact of the penalty on the cost of mounting
the attack and observe that HTLC-GP is weakly effective in disincentivizing the
attacker in certain conditions. To further increase the cost of attack, we
introduce the concept of \emph{guaranteed minimum compensation}, denoted as
$\zeta$, and modify HTLC-GP into $\textrm{HTLC-GP}^{\zeta}$. By experimenting
on several instances of Lightning Network, we observe that the total coins
locked in the network drops to $28\%$ for $\textrm{HTLC-GP}^{\zeta}$, unlike in
HTLC-GP where total coins locked does not drop below $40\%$. These results
justify that $\textrm{HTLC-GP}^{\zeta}$ is better than HTLC-GP to counter
griefing attacks.
