Wiser: Increasing Throughput in Payment Channel Networks with Transaction Aggregation

TL;DR

Wiser introduces transaction aggregation in payment channel networks to increase throughput, reduce fees, and enhance privacy by executing multiple transactions simultaneously, inspired by financial netting techniques.

Contribution

The paper formulates transaction aggregation as a generalized Bank Clearing Problem, proposing a framework and a fixed-parameter linear algorithm for special cases to address NP-hardness.

Findings

Wiser reduces intermediary fees and transaction data exposure.

It offers a fixed-parameter linear solution for specific aggregation cases.

The approach enhances throughput in payment channel networks.

Abstract

Payment channel networks (PCNs) are one of the most prominent solutions to the limited transaction throughput of blockchains. Nevertheless, PCNs suffer themselves from a throughput limitation due to the capital constraints of their channels. A similar dependence on high capital is also found in inter-bank payment settlements, where the so-called netting technique is used to mitigate liquidity demands. In this work, we alleviate this limitation by introducing the notion of transaction aggregation: instead of executing transactions sequentially through a PCN, we enable senders to aggregate multiple transactions and execute them simultaneously to benefit from several amounts that may "cancel out". Two direct advantages of our proposal is the decrease in intermediary fees paid by senders as well as the obfuscation of the transaction data from the intermediaries. We formulate the transaction aggregation as a computational problem, a generalization of the Bank Clearing Problem. We present a generic framework for the transaction aggregation execution, and thereafter we propose Wiser as an implementation of this framework in a specific hub-based setting. To overcome the NP-hardness of the transaction aggregation problem, in Wiser we propose a fixed-parameter linear algorithm for a special case of transaction aggregation as well as the Bank Clearing Problem. Wiser can also be seen as a modern variant of the Hawala money transfer system, as well as a decentralized implementation of the overseas remittance service of Wise.