A Centrality Analysis of the Lightning Network

TL;DR

This paper analyzes the Lightning Network's structure, revealing increasing centralization over time with a small number of nodes handling most transactions, which impacts its decentralization and security.

Contribution

It provides an empirical centrality analysis of the Lightning Network, including a novel tool to study its evolution over time using extensive data.

Findings

The network is generally decentralized but has a skewed distribution of transaction load.

Centrality has increased significantly over the last two years.

The Gini index of centrality inequality has risen by over 10%.

Abstract

Payment channel networks (PCNs) such as the Lightning Network offer an appealing solution to the scalability problem faced by many cryptocurrencies operating on a blockchain such as Bitcoin. However, PCNs also inherit the stringent dependability requirements of blockchain. In particular, in order to mitigate liquidity bottlenecks as well as on-path attacks, it is important that payment channel networks maintain a high degree of decentralization. Motivated by this requirement, we conduct an empirical centrality analysis of the popular Lightning Network, and in particular, the betweenness centrality distribution of the routing system. Based on our extensive data set (using several millions of channel update messages), we implemented a TimeMachine tool which enables us to study the network evolution over time. We find that although the network is generally fairly decentralized, a small number of nodes can attract a significant fraction of the transactions, introducing skew. Furthermore, our analysis suggests that over the last two years, the centrality has increased significantly, e.g., the inequality (measured by the Gini index) has increased by more than 10%.