University of Twente Student Theses


An analysis of the decentralization and effectiveness of Lightning Network

Perik, L.W. (2022) An analysis of the decentralization and effectiveness of Lightning Network.

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Abstract:In 2021 alone, Bitcoin transactions added up to a total volume of $15.8 ∗ 10^12 USD, according to the Wall Street Journal. This was an increase of 567% with respect to 2020. However, smaller transactions can sometimes take several days before being confirmed and are subject to a significant fee. Bitcoin’s standard implementation therefore leaves much room for improvement before it would be a viable option for micro-payments. In 2015, Lightning Network was introduced with the goal of solving Bitcoin’s shortcomings. Enabling fast transactions and minimizing transaction fees, Lightning Network offers a peer-to-peer payment protocol layer on top of Bitcoin’s blockchain. Using this implementation, peers can create transactions off the blockchain, resulting in a higher level of anonymity. Though various papers have been published suggesting the network is centralized, most research was conducted when the network was significantly smaller. In this paper, we answer the question of how centralized Lightning Network is in 2022. The contribution in this paper is unique in that nodes are indexed by size, and their properties analyzed to find specific trends. We identify how the usage of address protocols differs for nodes, including an analysis of the percentage of nodes that are cloud-hosted. Furthermore, we conduct a channel funding experiment to discover the usage patterns and characteristics, such as the minimum channel size, of nodes of different sizes. Our results suggest that Lightning Network is still fairly centralized, with large nodes having a substantial share in the connectivity and effectiveness of the network.
Item Type:Essay (Bachelor)
Faculty:EEMCS: Electrical Engineering, Mathematics and Computer Science
Subject:54 computer science
Programme:Electrical Engineering BSc (56953)
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