Lightning Network: a second path towards centralisation of the Bitcoin economy

Abstract

The Bitcoin Lightning Network (BLN), a so-called "second layer" payment protocol, was launched in 2018 to scale up the number of transactions between Bitcoin owners. In this paper, we analyse the structure of the BLN over a period of 18 months, ranging from 14 th January 2018 to 13 th July 2019, at the end of which the network has reached 8.216 users, 122.517 active channels and 2.732,5 transacted bitcoins. Here, we consider three representations of the BLN: the daily snapshot one, the weekly snapshot one and the daily-block snapshot one. By studying the topological properties of the binary and weighted versions of the three representations above, we find that the total volume of transacted bitcoins approximately grows as the square of the network size; however, despite the huge activity characterising the BLN, the bitcoins distribution is very unequal: the average Gini coefficient of the node strengths (computed across the entire history of the Bitcoin Lightning Network) is, in fact, 0.88 causing the 10% (50%) of the nodes to hold the 80% (99%) of the bitcoins at stake in the BLN (on average, across the entire period). This concentration brings up the question of which minimalist network model allows us to explain the network topological structure. Like for other economic systems, we hypothesise that local properties of nodes, like the degree, ultimately determine part of its characteristics. Therefore, we have tested the goodness of the Undirected Binary Configuration Model (UBCM) in reproducing the structural features of the BLN: the UBCM recovers the disassortative and the hierarchical character of the BLN but underestimates the centrality of nodes; this suggests that the BLN is becoming an increasingly centralised network, more and more compatible with a core-periphery structure. Further inspection of the resilience of the BLN shows that removing hubs leads to the collapse of the network into many components, an evidence suggesting that this network may be a target for the so-called split attacks.

Bitcoin Transaction Networks: an overview of recent results

“…i , e c i -see also Appendix B) and plotted it versus the number of nodes. Interestingly, G c increases for three measures out of four, pointing out that the values of centrality are more and more unevenly distributed [18].…”

“…The evolution of the centralisation indices indicates that the BLN is not evolving towards a star graph (indeed, a too simplistic picture to faithfully describe the BLN topology) but towards a suitable generalization of it, i.e. the core-periphery structure [18] (see also later).…”

“…Analysis of the BLN mesoscale structure. In order to inspect the evolution of the BLN 'centralisation', the authors in [18] have considered two different sets of quantities. First, they have computed the Gini index…”

“…With the present work, we aim at summing up the results of three papers [16][17][18]. In [16], the authors analyse the local properties of two different Bitcoin representations, i.e.…”

“…the comparison between the evolution of purely structural properties and the appearance of price bubbles in a cyclical fashion. Lastly, in [18], the authors inspect the evolution of the BLN topology, pointing out that it is becoming an increasingly centralised system and that the 'capital' is becoming increasingly unevenly distributed.…”