Strengthening Multi-hop Channels via Strategic Mesh Connections

Shuytang Tang, Sherman S. M. Chow

Abstract: Scalable multi-hop cryptocurrency transactions are enabled by payment channel networks (PCNs) like the Lightning Network, which execute most transactions off-chain, greatly reducing on-chain activity. However, unrestricted channel formation often leads to centralization, creating a natural oligarchy where a few nodes gain disproportionate influence, weakening decentralization and raising risks of targeted attacks. Establishing a structured network in PCNs mitigates this issue by encouraging users to allocate channels strategically, resisting partitions. Reframing PCN connectivity, we introduce a ``strategic mesh channels'' model that strengthens multi-hop connectivity by creating virtual channels that connect individual channels while retaining user autonomy. Melding theoretical optimization with practical implementation, our simulations based on our smart-contract implementation show that, with an appropriate participation rate, our design significantly enhances decentralization, connectivity, and attack resilience over standard PCNs. Additionally, average users receive economic incentives to allocate channels strategically, driving broader adoption of this structured approach. Network resilience and fairness thus improve, challenging the assumption that decentralization requires unregulated, anarchic formation.

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