Max-min Hub Pricing in Payment Channel Networks

Abstract

Payment Channel Networks (PCNs) offer an efficient off-chain alternative to the blockchain for transactions. Router nodes in PCNs facilitate transactions between non-adjacent nodes in exchange for a fee. PCN topology tends to be centralized, with a select number of routers known as hubs dominating all payment services. The fee-setting choices of hubs in order to maximize their revenue present fertile grounds for the study of PCN communications and economics. In this paper, we conduct a comprehensive analysis of the Hub Price-Setting (HPS) game. In particular, we define approximate Best Response strategies (ϵ-BR) as well as approximate Nash equilibria (ϵ-NE). We prove that for any ϵ > 0, an ϵ-BR always exists, and can be computed in polynomial time. We also prove that for some ϵ > 0, an ϵ-NE may not exist. We furthermore introduce the notion of conservative estimate and present a max-min approach to the HPS game. Extensive evaluation results demonstrate the power of our proposed approach.