Lightning Creation Games
Zeta Avarikioti, Tomasz Lizurej, Tomasz Michalak, Michelle Yeo

TL;DR
This paper analyzes the incentive mechanisms and equilibrium conditions for creating payment channel networks, proposing algorithms to optimize user utility and studying network topology stability.
Contribution
It introduces utility-based optimization algorithms for user incentives and examines the conditions for stable network topologies as Nash equilibria.
Findings
Algorithms for utility maximization under budget constraints.
Conditions for simple graph topologies to be Nash equilibria.
Insights into incentive structures influencing network formation.
Abstract
Payment channel networks (PCNs) are a promising solution to the scalability problem of cryptocurrencies. Any two users connected by a payment channel in the network can theoretically send an unbounded number of instant, costless transactions between them. Users who are not directly connected can also transact with each other in a multi-hop fashion. In this work, we study the incentive structure behind the creation of payment channel networks, particularly from the point of view of a single user that wants to join the network. We define a utility function for a new user in terms of expected revenue, expected fees, and the cost of creating channels, and then provide constant factor approximation algorithms that optimise the utility function given a certain budget. Additionally, we take a step back from a single user to the whole network and examine the parameter spaces under which simple…
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Taxonomy
TopicsGame Theory and Applications · Blockchain Technology Applications and Security · Quantum Computing Algorithms and Architecture
