Cryptology ePrint Archive: Report 2018/320

Foundations of State Channel Networks

Stefan Dziembowski and Sebastian Faust and Kristina Hostakova

Abstract: One of the main challenges that hinder further adaption of decentralized cryptocurrencies is scalability. Because current cryptocurrencies require that all transactions are processed and stored on a distributed ledger -- the so-called blockchain -- transaction throughput is inherently limited. An important proposal to significantly improve scalability are off-chain protocols, where the massive amount of transactions is executed without requiring the costly interaction with the blockchain. Examples of off-chain protocols include payment channels and networks, which are currently deployed by popular cryptocurrencies such as Bitcoin and Ethereum. A further extension of payment networks envisioned for cryptocurrencies are so-called state channel networks. In contrast to payment networks that only support carrying out off-chain payments between users, state channel networks allow execution of arbitrary complex smart contracts. The main contribution of this work is to give the first full specification for general state channel networks. Moreover, we provide formal security definitions and develop security proofs showing that our construction satisfies security against powerful adversaries. An additional benefit of our construction over most existing payment networks is the use of channel virtualization, which further reduces latency and costs in complex channel networks.

Category / Keywords: state channels, cryptocurrencies, blockchain, smart contracts

Date: received 29 Mar 2018, last revised 8 Apr 2018

Contact author: sebastian faust at gmail com

Available format(s): PDF | BibTeX Citation

Note: Added high-level description and pictures.

Version: 20180408:230545 (All versions of this report)

Short URL: ia.cr/2018/320

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