Off-chain transaction channels represent one of the leading techniques to scale the transaction throughput in cryptocurrencies. However, the economic effect of transaction channels on the system has not been explored much until now. We study the economics of Bitcoin transaction channels, and present a framework for an economic analysis of the lightning network and its effect on transaction fees on the blockchain. Our framework allows us to reason about different patterns of demand for transactions and different topologies of the lightning network, and to derive the resulting fees for transacting both on and off the blockchain. Our initial results indicate that while the lightning network does allow for a substantially higher number of transactions to pass through the system, it does not necessarily provide higher fees to miners, and as a result may in fact lead to lower participation in mining within the system.
|Original language||American English|
|Title of host publication||2022 58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022|
|Publisher||Institute of Electrical and Electronics Engineers Inc.|
|Number of pages||8|
|State||Published - 2022|
|Event||58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022 - Monticello, United States|
Duration: 27 Sep 2022 → 30 Sep 2022
|Name||2022 58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022|
|Conference||58th Annual Allerton Conference on Communication, Control, and Computing, Allerton 2022|
|Period||27/09/22 → 30/09/22|
Bibliographical notePublisher Copyright:
© 2022 IEEE.
- lightning network
- transaction channels