Paper 2023/1027

State Machines across Isomorphic Layer 2 Ledgers

Abstract

With the ever greater adaptation of blockchain systems, smart contract based ecosystems have formed to provide financial services and other utility. This results in an ever increasing demand for transactions on blockchains, however, the amount of transactions per second on a given ledger is limited. Layer-2 systems attempt to improve scalability by taking transactions off-chain, with building blocks that are two party channels which are concatenated to form networks. Interaction between two parties requires (1) routing such a network, (2) interaction with and collateral from all intermediaries on the routed path and (3) interactions are often more limited compared to what can be done on the ledger. In contrast to that design, recent constructions such as Hydra Heads (FC’21) are both multi-party and isomorphic, allowing interactions to have the same expressiveness as on the ledger making it akin to a ledger located on Layer-2. The follow up Interhead Construction (MARBLE’22) further extends the protocol to connect Hydra Heads into networks by means of a “virtual” Hydra Head construction. This work puts forth an even greater generalization of the Interhead Protocol, allowing for inter- action across different Layer-2 ledgers with a multitude of improvements. As concrete example, our design is modular and lightweight, which makes it viable for both full virtual ledger constructions as well as straightfor- ward one-time interactions and payments systems.