On Search Friction of Route Discovery in Offchain Networks

Abstract

Offchain networks provide a promising solution to overcome the scalability challenges of cryptocurrencies. However, design tradeoffs of offchain networks are still not well-understood today. In particular, offchain networks typically rely on fees-based incentives and hence require mechanisms for the efficient discovery of "good routes": routes with low fees (cost efficiency) and a high success rate of the transaction routing (effectiveness). Furthermore the route discovery should be confidential (privacy), and e.g., not reveal information about who transacts with whom or about the transaction value. This paper provides an analysis of the "search friction" of route discovery, i.e., the costs and tradeoffs of route discovery in large-scale offchain networks in which nodes behave strategically. As a case study, we consider the Lightning network and the route discovery service provided by the trampoline nodes, evaluating the tradeoff in different scenarios also empirically. Finally, we initiate the discussion of alternative charging schemes for offchain networks.