Sprites and State Channels: Payment Networks that Go Faster than\n Lightning

Abstract

Bitcoin, Ethereum and other blockchain-based cryptocurrencies, as deployed\ntoday, cannot scale for wide-spread use. A leading approach for cryptocurrency\nscaling is a smart contract mechanism called a payment channel which enables\ntwo mutually distrustful parties to transact efficiently (and only requires a\nsingle transaction in the blockchain to set-up). Payment channels can be linked\ntogether to form a payment network, such that payments between any two parties\ncan (usually) be routed through the network along a path that connects them.\nCrucially, both parties can transact without trusting hops along the route.\n In this paper, we propose a novel variant of payment channels, called\nSprites, that reduces the worst-case "collateral cost" that each hop along the\nroute may incur. The benefits of Sprites are two-fold. 1) In Lightning Network,\na payment across a path of $\\ell$ channels requires locking up collateral for\n$\\Theta(\\ell\\Delta)$ time, where $\\Delta$ is the time to commit an on-chain\ntransaction. Sprites reduces this cost to $O(\\ell + \\Delta)$. 2) Unlike prior\nwork, Sprites supports partial withdrawals and deposits, during which the\nchannel can continue to operate without interruption.\n In evaluating Sprites we make several additional contributions. First, our\nsimulation-based security model is the first formalism to model timing\nguarantees in payment channels. Our construction is also modular, making use of\na generic abstraction from folklore, called the "state channel," which we are\nthe first to formalize. We also provide a simulation framework for payment\nnetwork protocols, which we use to confirm that the Sprites construction\nmitigates against throughput-reducing attacks.\n