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ETH Zurich – Distributed Computing Group Roger Wattenhofer Cryptomoney & Payment Networks What’s Next?

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Page 1: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

ETH Zurich – Distributed Computing Group

Roger Wattenhofer

Cryptomoney & Payment Networks

What’s Next?

Page 2: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Preamble

Page 3: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Digital Transformation

Page 4: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system
Page 5: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Trust in me!

Page 6: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain

Page 7: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain = Ledger

Page 8: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Transaction

Page 9: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Transaction

Page 10: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Transaction

Page 11: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Block

Page 12: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain

Page 13: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain

Page 14: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Transaction Inspection

Page 15: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain

Page 16: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

A Blockchain is Replicated

Page 17: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain Variants

Page 18: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissionless / Open

Page 19: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissioned / Closed

Page 20: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissioned / Closed

Page 21: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Do You Need a Blockchain?

Page 22: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Multiple Participants?

No Blockchain(use database)

no

Page 23: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Multiple Participants?

Participants Known?

No Blockchain(use database)

Permissioned Blockchain

PermissionlessBlockchain

yes

no

no

yesBIM

Page 24: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchain Dimensions

Page 25: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

PersistenceP

riva

cyEnergy

The Seven Blockchain Dimensions

Page 26: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Throughput Comparison

7 tx/s 20 tx/s 65,000 tx/s

Page 27: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

A Simpler Blockchain

Page 28: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

“The problem of course is the payee

can't verify that one of the owners did

not double-spend the coin.”

“We need a system for participants to

agree on a single history of the order in

which [transactions] were received.”

Page 29: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

no double-spending

=single order

=consensus

Page 30: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Double-Spending

Page 31: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Blockchains Solve Double-Spending Problem

Page 32: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

What About Network Outages?

Page 33: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Without Consensus

Page 34: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissioned Blockchain

Needed: 4 out of 5 signatures

Page 35: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissioned Blockchain

Page 36: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissioned Blockchain

Page 37: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Point To All Transactions!

No Main Chain, No Total Order

BD+E

EG+H

D F

G K

F+HJ

J+KLAB+C

C M

Page 38: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payment Networks

Page 39: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Permissioned Blockchain (Layer 1)

Page 40: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payments in Network (Layer 2)

Page 41: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Lightning Network (Explorer)

Page 42: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Many Layer 2 Designs

Duplex

Lightning

Eltoo

Raiden

Perun

Pisa

Connext

Plasma

NoCust

Page 43: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Channels

Page 44: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payment channels

Page 45: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payment channels

Page 46: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payment channels

Funding transaction

5 4

Page 47: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payment channel

5 4

2 7

8 1

Page 48: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Payment Network

Page 49: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

ETH Zurich – Distributed Computing Group

Roger Wattenhofer

Strategic Formation of Payment Networks

Page 50: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Centralized design

Decentralized design

Online algorithms

Offline algorithms

Game theory

How to build payment networks

Page 51: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Multi-party channels

Page 52: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

How can I profit the

most?

?

? ?

?

Given a sequence of transactions...

?

?

?

? (A, B, 6)(B, D, 8)(A, C, 2)(D, A, 10)(E, C, 3)(B, D, 6)

Page 53: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

?

? ?

?

Given a sequence of transactions...

?

?

?

? (A, B, 6)(B, D, 8)(A, C, 2)(D, A, 10)(E, C, 3)(B, D, 6)

● Choose edges● Choose capital assignments● Choose tx

Page 54: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Hubs are almost optimal!

Page 55: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

What about the online case?

No competitive algorithm even for a single channel!

Page 56: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Centralized design

Decentralized design

Online algorithms

Offline algorithms

Game theory

How to build payment networks

Page 57: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

The Trade-offs

Blockchain fee: open/close

channels

Reduce cost of transactions

Gain lightning fees to route transactions

Page 58: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Social optimum = tree

f↑

f↑

Page 59: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Summary

Persistence

Pri

vacy

Energy

Page 60: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Thank You!Questions & Comments?

Roger Wattenhofer, ETH Zurich, www.disco.ethz.ch

Page 61: Cryptomoney & Payment Networks What’s Next?db770cd7-a791-420f... · 7 tx/s 20 tx/s 65,000 tx/s. A Simpler Blockchain “The problem of course is the payee ... “We need a system

Ene, mene, eins, zwei, drei, Bitcoins bringemir herbei. Hash Hash.

@grauhut