On twitter, someone wrote this post (slightly modified - original: https://x.com/smspoolnet/status/1941786886902558831):

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Monero (XMR) > BTC Lightning Network for privacy:

• XMR hides sender, receiver, & amount by default

• All transactions look the same on-chain

• No channel or routing leaks

• No reliance on third parties

• LN privacy is optional & can be broken with analysis

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My reply:

> XMR hides sender

Not through encryption. It puts them in a list with 15 other random pubkeys and says "one of these is the true sender." Then it publishes that list forever on a blockchain. Chain analysts can often figure out which pubkey is the true spender. In lightning the sender is actually encrypted and nothing is published to a blockchain. This makes it much harder for analysts to identify the sender.

> XMR hides...receiver

Not from the sender. The receiver's XMR address and stealth pubkey are shown to the sender in plaintext, and this makes it possible to do poisoned output attacks to trace monero, i.e. the attacker sends some money to a target and then watches the blockchain to see if the target sends it to someone who knows their identity. This is how many of the targets in the case studies on moneroleaks.xyz got caught. On lightning, by contrast, the sender does *not* know who received the funds, because lightning supports trampoline routing by default, meaning the sender cannot know if the person who *looks* like the recipient is *really* the recipient or just another routing node.

> XMR hides...[the] amount by default

(1) Only part of it. The fee is published in plaintext, and this is useful to chain analysts because they use it for wallet fingerprinting -- e.g. custodial services tend to set higher fees than users of self-custodial wallets do. Lightning, of course, hides the fee better by (a) using encryption so that each routing node only knows the portion of the fee they received (b) not publishing anything about the transaction on a blockchain.

(2) Monero does not hide the mount received from the sender. The sender picks how much to send to the recipient and monero does not support transaction chaining so the recipient cannot modify it. Whereas in lightning, the sender knows how much he *sent,* but due to transaction chaining, he does not know how much the recipient *received.* The recipient may have atomically forwarded all, some, or none of the payment to someone else, and the sender would have no idea. In this respect, LN has better amount privacy than XMR.

> All transactions look the same on-chain

No they don't. Some pay higher fees; some have more inputs; some have more outputs; some use pubkeys as decoys that analysts *know* are decoys (because they control those pubkeys, or their partners do). All of this data is used by analysts for fingerprinting and tracing.

But once again, LN does better here: the data produced by the sender is actually encrypted and padded to 1300 bytes. It looks the same to the routing node as if he was forwarding a payment from someone else. It's *truly* indistinguishable, verifiably, through cryptography.

And that's a major improvement on this metric.

> No channel or routing leaks

Monero uses something with a lot of similarities to routing: dandelion++

They are similar in this respect: both try to hide the sender's ip address by forwarding a packet to someone else, who then forwards it to another node, etc., such that "later" nodes don't know if "prior" nodes are the sender or just another "stem node" (in dandelion++) or "routing node" (in LN). This is actually really good for your privacy, but when LN does it, XMR people call it a leak, whereas, of course, when they do it, it's the best thing since sliced bread.

> No reliance on third parties

There is: if you use dandelion++, the nodes in the stem phase can collude to identify you as either the sender or at least another stem node. This is a leak that LN and XMR both share. But in XMR it's worse, because if you are using a light client (e.g. a phone wallet), you don't actually use dandelion++, instead you pick a random node on the network and use RPC commands to send your transaction, thus doxing your ip address to a random node, possibly one run by chainalysis. That is how one of the people got caught in the Case Studies section of moneroleaks.xyz. Lightning, of course, improves this: you don't pick random nodes on the network to send your transaction to in plaintext, instead you encrypt all your transactions and only show them to a select group of nodes chosen by you when you created your channels. This is way better.

> LN privacy is optional

That's also the case with monero. What wallets do most users pick? Ones like exodus and coinomi and freewallet, which are able to easily log your ip address and associate them with your transactions. (Freewallet is also custodial, so it knows even *more* data.)

Privacy is always optional, and if you're seeking good privacy, LN is the better option.