Scaling Solutions for the Blockchain

November 2015 - November 2018
About 69,500 €
Funding organization: 

Politecnico di Torino

Person(s) in charge: 
Executive summary: 

The goal of the research project is to analyze capabilities and limitations of payment channel networks, the most explored solutions which aim to solve the well-known blockchain scalability issue.

Since June 2017, the research project is conducted by the Nexa Center in cooperation with Fulgur Lab.


Bitcoin is a decentralized cryptocurrency that allows mistrusting peers to send and receive monetary value without the need for intermediaries. Bitcoin relies on the blockchain, a distributed peer-to-peer public ledger which stores all the history of Bitcoin economic transactions. The blockchain protocol, which is designed to contain centralization and to allow any peer to actively participate in the system, limits the transaction throughput. For this reason, Bitcoin and other blockchain-based cryptocurrencies do not scale.

Payment channel networks are the most promising solution to address the blockchain scalability issue, as they enable off-blockchain payments which are not subject to the blockchain throughput limit. Payment channels are two-party bidirectional channels which allow the two channel parties to exchange an unbounded number of off-chain payments. Payment channels are linked together to form a payment channel network, which allows off-chain payments also to parties not directly connected by a payment channel.

The Lightning Network (LN) is the mainstream payment channel network, built for Bitcoin. At its current state of development, the LN presents critical features that, if not properly understood, implemented and controlled, might undermine the development of a healthy payment network. Example of these critical features are: channel economic capacity, which limits payment amounts; channel unbalancing, which makes payment channels unusable in one direction; uncooperative behavior of nodes, which may cause payment failures and lock of funds.


The goal of this research project is to analyze capabilities and limitations of payment channel networks. To accomplish with this goal, we developed CLoTH, a simulator for payment channel networks. CLoTH takes as input parameters defining a payment network (e.g., number of channels per node, average channel capacity) and parameters defining payments (e.g., payment amounts and payment rate). It simulates the input-defined payments on the input-defined payment network. It produces performance measures in terms of payment-related statistics, such as probability of payment failure and time to complete payments. CLoTH is a valuable tool to identify issues, analyze solutions and steer future developments of payment channel networks.

So far, we designed and conducted three groups of simulations using CLoTH: (i) simulations on the Lightning Network, which allowed to discover non-operative configurations of the Lightning Network, i.e., configurations in which a payment is more likely to fail than to succeed; (ii) simulations on synthetic networks generated by the simulator, which analyzed the impact of the simulator input parameters on payment network performance; (iii) simulations which studied different network and protocol modifications on the Lightning Network (such as removal of the most connected nodes from the network, and protocol optimizations which address the identified LN issues).


The main achievements of this research project are:
• The development of CLoTH, a simulator for payment channel networks and especially for the Lightning Network, which constitutes the main technical solution to address the well-known scalability problem of the Bitcoin blockchain. CLoTH helps to identify issues of payment channel networks and to estimate the effects of protocol optimizations on the network. It also allows to simulate attack scenarios and to experimentally study the evolution of payment channel networks.
• Simulation results on payment channel networks. The main findings proved that the current most relevant issues of the Lightning Network are: payment failures due to insufficient channel capacities; channel unbalancing, which causes payment delays and failures. On the other side, simulations proved that the Lightning Network is resilient to the removal of the most connected network hubs and can support a contained level of node uncooperativeness. Another remarkable finding was that a rebalancing approach that we designed and simulated proved to be effective against channel unbalancing.
• A journal paper titled The CLoTH Simulator for HTLC Payment Networks with Introductory Lightning Network Performance Results, presenting the CLoTH simulator and the first simulation results.
• A literature review on the blockchain, which highlights the main research challenges of the blockchain (scalability and anonymity) and discusses possible applications of this technology. The literature review has been published as a paper titled Blockchain for the Internet of Things: a Systematic Literature Review.