Payment networks were introduced to address the limitation on the transaction throughput of popular blockchains. To open a payment channel one has to publish a transaction on-chain and pay the appropriate transaction fee. A transaction can be routed in the network, as long as there is a path of channels with the necessary capital. The intermediate nodes on this path can ask for a fee to forward the transaction. Hence, opening channels, although costly, can benefit a party, both by reducing the cost of the party for sending a transaction and by collecting the fees from forwarding transactions of other parties. This trade-off spawns a network creation game between the channel parties. In this work, we introduce the first game theoretic model for analyzing the network creation game on blockchain payment channels. Further, we examine various network structures (path, star, complete bipartite graph and clique) and determine for each one of them the constraints (fee value) under which they constitute a Nash equilibrium, given a fixed fee policy. Last, we show that the star is a Nash equilibrium when each channel party can freely decide the channel fee. On the other hand, we prove the complete bipartite graph can never be a Nash equilibrium, given a free fee policy.
No abstract
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.