Paper 2023/938

Musketeer: Incentive-Compatible Rebalancing for Payment Channel Networks

Zeta Avarikioti, TU Wien
Stefan Schmid, TU Berlin
Samarth Tiwari, Centrum Wiskunde & Informatica

In this work, we revisit the severely limited throughput problem of cryptocurrencies and propose a novel rebalancing approach for Payment Channel Networks (PCNs). PCNs are a popular solution for increasing the blockchain throughput, however, their benefit depends on the overall users’ liquidity. Rebalancing mechanisms are the state-of-the-art approach to maintaining high liquidity in PCNs. However, existing opt-in rebalancing mechanisms exclude users that may assist in rebalancing for small service fees, leading to suboptimal solutions and under-utilization of the PCNs’ bounded liquidity. We introduce the first rebalancing approach for PCNs that includes all users, following an “all for one and one for all” design philosophy that yields optimal throughput. The proposed approach introduces a double-auction rebalancing problem, which we term Musketeer, where users can participate as buyers (paying fees to rebalance) or sellers (charging fees to route transactions). The desired properties tailored to the unique characteristics of PCNs are formally defined, including the novel property of cyclic budget balance that is a stronger variation of strong budget balance. Basic results derived from auction theory, including an impossibility and multiple mechanisms that either achieve all desiderata under a relaxed model or sacrifice one of the properties, are presented. We also propose a novel mechanism that leverages time delays as an additional cost to users. This mechanism is provably truthful, cyclic budget balanced, individually rational, and economic efficient but only with respect to liquidity.

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Publication info
blockchainspayment channel networksincentivesrouting feesrebalancingdouble auction
Contact author(s)
georgia avarikioti @ tuwien ac at
stefan schmid @ tu-berlin de
samarth tiwari @ cwi nl
2023-06-19: approved
2023-06-15: received
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      author = {Zeta Avarikioti and Stefan Schmid and Samarth Tiwari},
      title = {Musketeer: Incentive-Compatible Rebalancing for Payment Channel Networks},
      howpublished = {Cryptology ePrint Archive, Paper 2023/938},
      year = {2023},
      note = {\url{}},
      url = {}
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