Related papers: Liquidity in Credit Networks: A Little Trust Goes …
In order to scale transaction rates for deployment across the global web, many cryptocurrencies have deployed so-called "Layer-2" networks of private payment channels. An idealized payment network behaves like a Credit Network, a model for…
Credit networks rely on decentralized, pairwise trust relationships (channels) to exchange money or goods. Credit networks arise naturally in many financial systems, including the recent construct of payment channel networks in blockchain…
To improve transaction rates, many cryptocurrencies have implemented so-called ''Layer-2'' transaction protocols, where payments are routed across networks of private payment channels. However, for a given transaction, not every network…
The Bitcoin Lightning network is a mechanism to enable fast and inexpensive off-chain Bitcoin transactions using peer-to-peer (P2P) channels between nodes that can also be composed into a routing path. Although the resulting possible…
In this paper, we propose a technique for rebalancing link weights in decentralized credit networks. Credit networks are peer-to-peer trust-based networks that enable fast and inexpensive cross-currency transactions compared to traditional…
Given a graph $G$ whose edges are perfectly reliable and whose nodes each operate independently with probability $p\in[0,1],$ the node reliability of $G$ is the probability that at least one node is operational and that the operational…
This work explores the characteristics of financial contagion in networks whose links distributions approaches a power law, using a model that defines banks balance sheets from information of network connectivity. By varying the parameters…
We develop a model where currency issuers provide liquidity, while users in a trade network choose currency usage for trade settlement. We identify a feedback mechanism where a user's currency preference spillovers to others and increases…
We study a random process over graphs inspired by the way payments are executed in the Lightning Network, the main layer-two solution on top of Bitcoin. We first prove almost tight upper and lower bounds on the time it takes for a payment…
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…
A payment channel network is a blockchain-based overlay mechanism that allows parties to transact more efficiently than directly using the blockchain. These networks are composed of payment channels that carry transactions between pairs of…
Community currency networks are made up of individuals and or companies that share some physical or social characteristics and engage in economic transactions using a virtual currency. This paper investigates the structural and dynamic…
Money flow models are essential tools to understand different economical phenomena, like saving propensities and wealth distributions. In spite of their importance, most of them are based on synthetic transaction networks with simple…
Various social, financial, biological and technological systems can be modeled by interdependent networks. It has been assumed that in order to remain functional, nodes in one network must receive the support from nodes belonging to…
Cryptocurrencies such as Bitcoin and Ethereum have made payment transactions possible without a trusted third party, but they have a scalability issue due to their consensus mechanisms. Payment networks have emerged to overcome this…
The Lightning Network, known for its millisecond settlement speeds and low transaction fees, offers a compelling alternative to traditional payment processors, which often have higher fees and longer processing times. This is particularly…
Networks in nature do not act in isolation but instead exchange information, and depend on each other to function properly. An incipient theory of Networks of Networks have shown that connected random networks may very easily result in…
A fundamental problem in the study of networks is the identification of important nodes. This is typically achieved using centrality metrics, which rank nodes in terms of their position in the network. This approach works well for static…
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete. We show that techniques such as Maximum Entropy currently used to reconstruct…
People and companies move money with every financial transaction they make. We aim to understand how such activity gives rise to large-scale patterns of monetary flow. In this work, we trace the movement of e-money through the accounts of a…