The Impact of Demand Patterns and Pathfinding Strategies on Payment Channel Networks

Abstract: Payment Channel Networks (PCNs) provide a solution to the scalability problem in blockchain technology. They facilitate multiple-hop transactions via payment channels between peers, allowing for the execution of several transactions before updating each node’s balance on the blockchain. However, the performance of the network in effectively routing payments is affected by unbalanced channels. This imbalance reduces the network’s ability to route payments in both directions within a channel, resulting in decreased overall performance. Previous research has identified unidirectional payment flows in the network as the underlying cause of this issue. The payment flow is based on the demand for payments between peers and the paths these payments take. The aim of this study is to investigate the relationship between payment patterns and the average channel imbalance, where the payment pattern is a combination of demand patterns and what pathfinding algorithm is used. The study uses a model of PCNs that allows the relationship of the variables of interest to be measured, while other impacting variables are controlled. A deterministic value of the average channel imbalance for a PCN topology, demand pattern, and pathfinding strategy is achieved by computing the steady-state imbalance. The results show that the less homogeneous the demand pattern is, the more asymmetric the payment flow becomes, and the more imbalanced the network’s channels become. The results confirm what previous research mentions: unidirectional flow causes the payment channel to become imbalanced. The demand pattern that generates unidirectional flow imbalance significantly affects the entire network, regardless of the pathfinding strategy employed. Even with the possibility of a pathfinding strategy influencing payment flow to make it less unidirectional, the inherent unbalanced nature of the demand pattern remains a considerable challenge. The results also show that the pathfinding strategy has a less significant impact than the demand pattern on the balance of the network over time.