What happen if a popular channel hub turns dishonest? I've read and watched as many presentations as I could about the lightning network.  I have a few questions about the economic model of the network.


What would happen when a large hub turns nefarious and change the transaction state dishonestly?  I understand that everyone who has an open channel with that hub can revert and back out of the channel on their own accords.  I assume the software will send the last good state of the channel back to layer 1 - bitcoin to settle.  Wouldn't that flood the blockchain with settlement transactions?  Same thing could happen if a software glitch happen to one of the hub rendering it dishonest/buggy output (like what happened with parity in Ethereum).
Since bitcoin fee is dynamic and blocksize is limited, what happen if the fee to settle a channel exceed the value of the channel itself?  Wouldn't that mean a huge amount of fund would be deadlocked?
What would happen when a large hub turns nefarious and change the transaction state dishonestly?


They can't do that. In order to change the channel state, both parties in the channel MUST sign the commitment transaction that does so. A hub is not some centralized node that has full power over all of their open channels. In order for any actions to occur in a payment channel, both parties must agree to it and sign the transactions.


  Since bitcoin fee is dynamic and blocksize is limited, what happen if the fee to settle a channel exceed the value of the channel itself? Wouldn't that mean a huge amount of fund would be deadlocked?


The fee rate paid in the commitment transactions are decided beforehand and locked into place before any transactions are made. If the fee rate were to change, then the parties in the channel can agree to increase the fee rate by using the update_fee message.