Layer 2 Cryptocurrency Networks Cryptocurrency transaction rates are - - PowerPoint PPT Presentation

Layer 2 Cryptocurrency Networks

• Cryptocurrency transaction rates are slow.
• How can we build trusted relationships in an untrusted context?
• Answer: Private recordkeeping of funds in a joint account.

1

A B $10 Joint Account (Public) I have $3, B has $7 I have $7, A has $3

Continuous Credit Networks and Layer 2 Blockchains Ashish Goel and Geoffrey Ramseyer, Stanford University

Cost vs. Performance in Layer 2 Networks

• Agents can run out of money – no network settles every transaction
• Larger shared accounts mean higher cost but fewer failed transactions
• How can we compare different network structures?

2

A B $10 Joint Account (Public) I have $0, B has $10 I have $10, A has $0

Continuous Credit Networks and Layer 2 Blockchains Ashish Goel and Geoffrey Ramseyer, Stanford University

Liquidity in Layer 2 Networks

• Model transactions as coming from an external, stochastic process
• Hence, network configuration evolves randomly
• Induces non-uniform distribution on configurations
• Liquidity of a transaction is the chance a transaction is feasible, given

this randomness

3

A B C D E 2 B:2, D:0 Can I (A) send money to E in this configuration?

Continuous Credit Networks and Layer 2 Blockchains Ashish Goel and Geoffrey Ramseyer, Stanford University

Summary of Results

• 1. Compute liquidity in an efficient manner – via reduction to

electrical resistance

• 2. Efficient configuration sampling algorithm – via reduction to

sampling from distribution on a convex set in ℝ𝑜

• 3. Liquidity is monotone: Adding edges cannot hurt liquidity (in many

cases of interest) – via connection to generating polynomials and Kirchhoff's Laws

• 4. Results apply to the “Credit Network” model, of which Layer 2

cryptocurrency networks are one instance.

4

Continuous Credit Networks and Layer 2 Blockchains Ashish Goel and Geoffrey Ramseyer, Stanford University