Wiser: Increasing Throughput in Payment Channel Networks with Transaction Aggregation

Abstract

Payment channel networks (PCNs) are one of the most prominent solutions to the limited transaction throughput of blockchains. Nevertheless, PCNs suffer themselves from a throughput limitation due to the capital constraints of their channels. A similar dependence on high capital is also found in inter-bank payment settlements, where the so-called netting technique is used to mitigate liquidity demands. In this work, we alleviate this limitation by introducing the notion of transaction aggregation: instead of executing transactions sequentially through a PCN, we enable senders to aggregate multiple transactions and execute them simultaneously to benefit from several amounts that may "cancel out". Two direct advantages of our proposal is the decrease in intermediary fees paid by senders as well as the obfuscation of the transaction data from the intermediaries. We formulate the transaction aggregation as a computational problem, a generalization of the Bank Clearing Problem. We present a generic framework for the transaction aggregation execution, and thereafter we propose WISER as an implementation of this framework in a specific hub-based setting. To overcome the NP-hardness of the transaction aggregation problem, in WISER we propose a fixed-parameter linear algorithm for a special case of transaction aggregation as well as the Bank Clearing Problem. WISER can also be seen as a modern variant of the Hawala money transfer system, as well as a decentralized implementation of the overseas remittance service of Wise.

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“…It addresses the issue of channel depletion and large required deposits, enhancing liquidity in the network. WISER proposed by Tiwari et al [117] meant to enable multiple hubs to collaborate using Multi-Party Computation (MPC) to aggregate transactions into a single monetary flow, providing optimal liquidity usage and efficient transaction aggregation meanwhile, privacy preserving route discovery by Pietrzak et al [118] have designed LightPIR in which, it offers a privacy preserving route discovery mechanism for finding the shortest path within the PCN. It efficiently utilizes hub labelling algorithms and private information retrieval.…”