Splitting Payments to Increase Blockchain Effectiveness

Abstract

Blockchain technology is the underlying mechanism that many cryptocurrencies operate on. It relies on cryptographic techniques that enforce integrity on transaction records. The records (blocks) stored are limited in size and frequency. One well-known issue regarding blockchain technology is the lack of scalability. In order to mitigate this problem, payment channels were introduced. These are considered an "off-chain" solution as communication with the blockchain is not required for executing transactions. Nonetheless, payment channels are debit-based, thus each channel that contributes to forwarding the payment is required to have a sufficient amount of coins to route the money. If this is not the case, the transaction may not succeed. For solving this matter, the node may decide to split the payment and forward it through multiple intermediaries until the destination is reached. This paper studies how fee models can be integrated into splitting protocols. An overview of the current state of the technology is provided, followed by a proposed solution for integrating fees into splitting protocols. It has been observed that splitting the payments and charging lower fees leads to a higher number of successful transactions, an outcome that was expected. The proposed fee model relies on the payment value and a statistic about the distribution of coins owned by the involved parties. The highest success ratio was achieved when combining the proposed design with the SplitIfNecessary splitting protocol. Nonetheless, when using the same fee model, there does not seem to be any pattern between the splitting protocol and the transaction value.