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The scalability of blockchain-based cryptocurrencies such as Bitcoin and Ethereum hinders their wide adoption.
This is due to the massive resource consumption required by their underlying consensus mechanisms for
guaranteeing the unique and synchronized global state. To address this scalability issue,
Payment Channel Networks (PCNs) have been proposed to enable instant and inexpensive payments
without requiring expensive and slow blockchain transactions. However, the concept of PCN is still
at its infancy stage, and its fundamental understanding is still lacking. The goal of this project
is to conduct a comprehensive study of PCNs from optimization, game theoretic, and economic perspectives,
by providing an advanced suite of algorithms, theories, and mechanisms for routing, pricing, and network
formation in PCNs. More specifically, this project will yield several advances: 1) Insightful understanding
about PCNs; 2) Realistic models of PCNs considering both balance constraints and expiry constraints;
3) Advanced algorithms for routing a payment in PCNs subject to path-dependent constraints;
4) Rigorous analytical models of balance allocation when multiple payment paths compete for
the available balance; 5) Scientific theories about the impact of the participants’ strategic
behavior on the routing in PCNs and the formation of PCNs; 6) New economic approaches that provide
guidelines on how to influence the participants in PCNs to make off-chain payments successful at the minimum cost.
This project is supported by NSF Award #2007083.
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