Abstract
The Bitcoin network has scalability problems. To increase its transaction rate and speed, micropayment channel networks have been proposed; however, these require to lock funds into specific channels. Moreover, the available space in the blockchain does not allow scaling to a worldwide payment system. We propose a new layer that sits in between the blockchain and the payment channels. The new layer addresses the scalability problem by enabling trustless off-blockchain channel funding. It consists of shared accounts of groups of nodes that flexibly create one-to-one channels for the payment network. The new system allows rapid changes of the allocation of funds to channels and reduces the cost of opening new channels. Instead of one blockchain transaction per channel, each user only needs one transaction to enter a group of nodes—within the group the user can create arbitrarily many channels. For a group of 20 users with 100 intra-group channels, the cost of the blockchain transactions is reduced by 90% compared to 100 regular micropayment channels opened on the blockchain. This can be increased further to 96% if Bitcoin introduces Schnorr signatures with signature aggregation.
Highlights
The increasing popularity of Bitcoin and other blockchain-based payment systems leads to new challenges, in particular, regarding scalability and transaction speed
A second major problem is transaction speed, the time from initiating a transaction until one can assume that the transaction has concluded, and is irreversible
We introduce a new layer between the blockchain and the payment network, giving a three-layered system
Summary
The increasing popularity of Bitcoin and other blockchain-based payment systems leads to new challenges, in particular, regarding scalability and transaction speed. This may be acceptable for long-term Bitcoin investors, but not for everyday 2 shopping or interacting with a vending machine [1]. To solve both scalability and speed, micropayment channel networks have been proposed [2,3]. A micropayment channel provides a way to trustlessly track money transfers between two entities offblockchain with smart contracts. If both parties are honest, they can commit the total balance of many transfers in a single transaction to the blockchain and ignore the smart contracts. Micropayment channel networks allow for fast transactions, as a transaction happens as soon as a smart contract is signed— the blockchain latency does not matter
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