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Ride the Lightning: The Game Theory of Payment Channels

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Financial Cryptography and Data Security (FC 2020)

Part of the book series: Lecture Notes in Computer Science ((LNSC,volume 12059))

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Abstract

Payment channels were introduced to solve various eminent cryptocurrency scalability issues. Multiple payment channels build a network on top of a blockchain, the so-called layer 2. In this work, we analyze payment networks through the lens of network creation games. We identify betweenness and closeness centrality as central concepts regarding payment networks. We study the topologies that emerge when players act selfishly and determine the parameter space in which they constitute a Nash equilibrium. Moreover, we determine the social optima depending on the correlation of betweenness and closeness centrality. When possible, we bound the price of anarchy. We also briefly discuss the price of stability.

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Author information

Authors and Affiliations

  1. ETH Zürich, Zürich, Switzerland

    Zeta Avarikioti, Lioba Heimbach, Yuyi Wang & Roger Wattenhofer

Authors
  1. Zeta Avarikioti
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  2. Lioba Heimbach
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  3. Yuyi Wang
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  4. Roger Wattenhofer
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Corresponding author

Correspondence to Zeta Avarikioti .

Editor information

Editors and Affiliations

  1. New York University, New York City, NY, USA

    Joseph Bonneau

  2. University of California, La Jolla, CA, USA

    Nadia Heninger

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© 2020 International Financial Cryptography Association

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Avarikioti, Z., Heimbach, L., Wang, Y., Wattenhofer, R. (2020). Ride the Lightning: The Game Theory of Payment Channels. In: Bonneau, J., Heninger, N. (eds) Financial Cryptography and Data Security. FC 2020. Lecture Notes in Computer Science(), vol 12059. Springer, Cham. https://doi.org/10.1007/978-3-030-51280-4_15

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  • DOI: https://doi.org/10.1007/978-3-030-51280-4_15

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-51279-8

  • Online ISBN: 978-3-030-51280-4

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