Incentives and Cryptographic Protocols for Bitcoin-like Blockchains

Abstract

Bitcoin is a widely acknowledged digital currency that is designed in a decentralized manner. The recognition of Bitcoin has introduced the notion of cryptocurrencies and, in general, blockchain technology. Blockchain, within less than a decade, has become one of the most exciting technological developments. Among several exciting use cases and projects, there has been an inevitable hype in the industry as well. While in the research community, it has opened an interdisciplinary research field among cryptography, distributed systems, and economics. Notwithstanding the interest and great effort, blockchain is still a new and evolving technology, and numerous challenges need to be addressed. To name a few, security, privacy, scalability, smart contracts, and economic aspects with their manifold sub-challenges can be mentioned.Among the research challenges, in this thesis, we investigate three crucial ones for the long-term functionality of the Bitcoin-like blockchains, which are security, scalability, and economic aspects.Our works can be divided into two subjects: transaction propagation and payment channel networks. Transaction propagation or advertisement refers to the dissemination of newly created transactions of clients in the mining network.In this thesis, we investigate the lack of incentives for transaction propagation and provide an incentive mechanism for peer-to-peer mining networks. Moreover, we focus on the inefficient routing of the transactions and propose a smart routing mechanism. Payment channel networks (PCN) are promising layer-2 protocols aiming to improve the scalability of blockchains.In this thesis, we present three works on the PCNs.Firstly, we investigate the incentives to participate in multi-hop payments and propose a profit strategy that would encourage the use of PCNs. Secondly, we propose the first Bitcoin-compatible virtual channel constructions on payment channels that improve the efficiency and availability of multi-hop payments. Finally, we introduce the first post-quantum PCN utilizing our post-quantum adaptor signature scheme. Our works mainly focus on Bitcoin and its PCN, Lightning Network, yet they can be applied to the blockchains and cryptocurrencies having similar characteristics.