An Evaluation of Cryptocurrency Payment Channel Networks and Their\n Privacy Implications

Abstract

Cryptocurrencies redefined how money can be stored and transferred among\nusers. However, independent of the amount being sent, public blockchain-based\ncryptocurrencies suffer from high transaction waiting times and fees. These\ndrawbacks hinder the wide use of cryptocurrencies by masses. To address these\nchallenges, payment channel network concept is touted as the most viable\nsolution to be used for micro-payments. The idea is exchanging the ownership of\nmoney by keeping the state of the accounts locally. The users inform the\nblockchain rarely, which decreases the load on the blockchain. Specifically,\npayment channel networks can provide transaction approvals in seconds by\ncharging a nominal fee proportional to the payment amount. Such attraction on\npayment channel networks inspired many recent studies which focus on how to\ndesign them and allocate channels such that the transactions will be secure and\nefficient. However, as payment channel networks are emerging and reaching large\nnumber of users, privacy issues are becoming more relevant that raise concerns\nabout exposing not only individual habits but also businesses' revenues. In\nthis paper, we first propose a categorization of the existing payment networks\nformed on top of blockchain-backed cryptocurrencies. After discussing several\nemerging attacks on user/business privacy in these payment channel networks, we\nqualitatively evaluate them based on a number of privacy metrics that relate to\nour case. Based on the discussions on the strengths and weaknesses of the\napproaches, we offer possible directions for research for the future of privacy\nbased payment channel networks.\n