TY - GEN
T1 - How to Charge Lightning
T2 - 58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022
AU - Branzei, Simina
AU - Segal-Halevi, Erel
AU - Zohar, Aviv
N1 - Publisher Copyright:
© 2022 IEEE.
PY - 2022
Y1 - 2022
N2 - Off-chain transaction channels represent one of the leading techniques to scale the transaction throughput in cryptocurrencies. However, the economic effect of transaction channels on the system has not been explored much until now. We study the economics of Bitcoin transaction channels, and present a framework for an economic analysis of the lightning network and its effect on transaction fees on the blockchain. Our framework allows us to reason about different patterns of demand for transactions and different topologies of the lightning network, and to derive the resulting fees for transacting both on and off the blockchain. Our initial results indicate that while the lightning network does allow for a substantially higher number of transactions to pass through the system, it does not necessarily provide higher fees to miners, and as a result may in fact lead to lower participation in mining within the system.
AB - Off-chain transaction channels represent one of the leading techniques to scale the transaction throughput in cryptocurrencies. However, the economic effect of transaction channels on the system has not been explored much until now. We study the economics of Bitcoin transaction channels, and present a framework for an economic analysis of the lightning network and its effect on transaction fees on the blockchain. Our framework allows us to reason about different patterns of demand for transactions and different topologies of the lightning network, and to derive the resulting fees for transacting both on and off the blockchain. Our initial results indicate that while the lightning network does allow for a substantially higher number of transactions to pass through the system, it does not necessarily provide higher fees to miners, and as a result may in fact lead to lower participation in mining within the system.
KW - blockchain
KW - lightning network
KW - transaction channels
UR - http://www.scopus.com/inward/record.url?scp=85142628462&partnerID=8YFLogxK
U2 - 10.1109/Allerton49937.2022.9929412
DO - 10.1109/Allerton49937.2022.9929412
M3 - ???researchoutput.researchoutputtypes.contributiontobookanthology.conference???
AN - SCOPUS:85142628462
T3 - 2022 58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022
BT - 2022 58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022
PB - Institute of Electrical and Electronics Engineers Inc.
Y2 - 27 September 2022 through 30 September 2022
ER -