Library > Payment Trees: Low Collateral Payments for Payment Channel Networks
March/2021, Financial Cryptography 2021
The security of blockchain based decentralized ledgers relies on consensus protocols executed between mutually distrustful parties. Such protocols incur delays which severely limit the throughput of such ledgers. Payment and state channels enable execution of offchain protocols that allow interaction between parties without involving the consensus protocol. Protocols such as Hashed Timelock Contracts (HTLC) and Sprites (FC’19) connect channels into Payment Channel Networks (PCN) allowing payments across a path of payment channels. Such a payment requires each party to lock away funds for an amount of time. The product of funds and locktime is the collateral of the party, i.e., their cost of opportunity to forward a payment. In the case of HTLC, the locktime is linear to the length of the path, making the total collateral invested across the path quadratic in size of its length. Sprites improved on this by reducing the locktime to a constant by utilizing smart contracts. Atomic Multi-Channel Updates (AMCU), published at CCS’19, introduced constant collateral payments without smart contracts. In this work we present the Channel Closure attack on AMCU that allows a malicious adversary to make honest parties lose funds. Furthermore, we propose the Payment Trees protocol that allows payments across a PCN with linear total collateral without the aid of smart contracts. A competitive performance similar to Sprites, and yet compatible to Bitcoin.