Payment Channels Under Network Congestion

Abstract

Sending transactions on leading blockchains such as Ethereum can be slow and costly. A payment channel is a well-known scaling solution that minimizes transactions sent on the chain, and allows users to transact more efficiently. One of the guarantees of payment channels is that there is no counterparty risk, so an honest party is able to withdraw the amount of money that is reflected by the most recent transaction agreed by both parties. In this paper, we show that this guarantee can be violated when the network is under congestion. Regardless of whether or not the honest party is online, the malicious party can leverage high transaction fees to gain more money than they're supposed to. We present a novel construction of payment channels that helps mitigates these types of attacks.