A secure payment channel rebalancing model for layer-2 blockchain

Abstract

The concept of cryptocurrencies is prevalently used in the financial world. Some of the currencies like Bitcoin and Ethereum have shown promising outputs. The scalability problem of these cryptocurrencies is an ongoing challenge, solved through many facets. Bitcoin Lightning Network, a Layer-2 solution to Bitcoin Network, is an off-chain crypto transaction platform working on payment channels to transact bi-directionally between two parties. When the maximum payments flow is unidirectional, the individual balances of the parties in the direction of payment get exhausted. It results in the transaction failing for future payments in that direction and lowers the feasibility of network usage. In this paper, we propose a heuristic-based distributed solution by preserving the privacy and anonymity of the parties involved in the rebalancing procedure and improving the fund transfer capability of the channels. The rebalancing mechanism has a global solution that can rebalance to the maximum extent and a local solution using a significantly lower fee. Again the indirect and direct rebalancing schemes balance the imbalanced channel and prevent further transaction failure and closure of channels due to insufficient balance. The resultant method also has an updation in the HTLC message exchange protocol to avoid the Flood and Loot attack that may arise to maintain the safe state of every honest participant in the network.