Ride the Lightning: The Game Theory of Payment Channels.
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Presented at FinancialCryptographyandDataSecurity 2020 by
Payment channels were introduced to solve various eminentcryptocurrency scalability issues. Multiple payment channels build a network on top of a blockchain, the so-called layer 2. In this work, we analyzepayment networks through the lens of network creation games. We identify betweenness and closeness centrality as central concepts regardingpayment networks. We study the topologies that emerge when playersact selfishly and determine the parameter space in which they constitutea Nash equilibrium. Moreover, we determine the social optima dependingon the correlation of betweenness and closeness centrality. When possible, we bound the price of anarchy. We also briefly discuss the price ofstability.