So, let’s say there's a lightning network transfer happening between two folks and they want proof for a third party to witness it. You can share the txid of the bitcoin transaction with that third person, and they can track it on the blockchain. But what about the lightning network itself? Can we actually track those transactions? I'm leaning towards using the lightning network because it's super cheap and fast, but I'm worried that it might not be traceable for someone else, which makes me think maybe I should stick to regular transactions that can be tracked with a txid.
Even lightning network transactions can be traced via hashes which are unique id for each payment but to track the hashes you need to provide payment channel information and hashes but it's never been as simple as pasting txid on an explorer and seeing the inputs and outputs since LN txs are offline transactions.
Lightning network transactions are true privacy, it's end to end encrypted to to only the two participants in the transaction which means it's not visible to anyone else, hence can not be tracked (explored in the block explorer).
Since lightning network transactions cannot be explored or are not visible in the block explorer, there are lightning network explorers[1] that shows the stats and information about the nodes on the network. You can use any of the LN explorer, there are many of them which include; https://1ml.com/ , https://amboss.space/ , https://lightningnetwork.plus/nodes etc you can use it to know the statuses of your lightning network.
[1] https://lightningwiki.net/index.php/Lightning_Network_explorers
That means you'll also need to be able to prove the seller gave you a certain payment request. I always considered LN to be mainly useful to pay services, and if you pay a service, it's also not possible to prove which deposit address they gave you (unless you get a signed message). Somehow nobody seems to care about that.
It can neither be used as evidence. How can the witness verify that the merchant indeed requested his coins to be sent at the address provided by the client?
I can only think of one way, but very few merchants do it: use PGP. The merchant signs a message including the address he wants you to send your coins in. Later, you send them. He cannot deny that's his, as you have a signed, solid evidence.
No, you can't use this in LN. Only the peers (the two LN nodes) can have this information for themselves, and cannot prove it to a third-party.
Hold your horses, to me it seems there's a way to prove a LN payment between payee and payer:
The Lightning Invoice is easy. This is what the payee presents to you. To obtain the payment pre-image shouldn't be rocket science but don't ask me, someone with more Lightning Network knowledge has to step in. The next mystery is how to mangle both to show the proof.
We'll get there eventually...
Untested (adjust accordingly):
I assume "displayed in ..." at step [2] is equivalent to your own payment confirmation record (should be obtainable from your own LN node).