Sprites and State Channels: Payment Networks that Go Faster than Lightning
This addresses the problem of high collateral costs and operational inefficiencies in payment networks like Lightning Network for users and developers in the cryptocurrency space, representing a significant but incremental improvement over prior work.
The paper tackles the scalability issue of blockchain-based cryptocurrencies by introducing Sprites, a novel payment channel variant that reduces the worst-case collateral cost from Θ(ℓΔ) to O(ℓ + Δ) for payments across ℓ channels and supports partial withdrawals and deposits without interruption.
Bitcoin, Ethereum and other blockchain-based cryptocurrencies, as deployed today, cannot scale for wide-spread use. A leading approach for cryptocurrency scaling is a smart contract mechanism called a payment channel which enables two mutually distrustful parties to transact efficiently (and only requires a single transaction in the blockchain to set-up). Payment channels can be linked together to form a payment network, such that payments between any two parties can (usually) be routed through the network along a path that connects them. Crucially, both parties can transact without trusting hops along the route. In this paper, we propose a novel variant of payment channels, called Sprites, that reduces the worst-case "collateral cost" that each hop along the route may incur. The benefits of Sprites are two-fold. 1) In Lightning Network, a payment across a path of $\ell$ channels requires locking up collateral for $Θ(\ellΔ)$ time, where $Δ$ is the time to commit an on-chain transaction. Sprites reduces this cost to $O(\ell + Δ)$. 2) Unlike prior work, Sprites supports partial withdrawals and deposits, during which the channel can continue to operate without interruption. In evaluating Sprites we make several additional contributions. First, our simulation-based security model is the first formalism to model timing guarantees in payment channels. Our construction is also modular, making use of a generic abstraction from folklore, called the "state channel," which we are the first to formalize. We also provide a simulation framework for payment network protocols, which we use to confirm that the Sprites construction mitigates against throughput-reducing attacks.