Towards a Game-Theoretic Security Analysis of Off-Chain Protocols

Off-chain protocols constitute one of the most promising approaches to solve the inherent scalability issue of blockchain technologies. The core idea is to let parties transact on-chain only once to establish a channel between them, leveraging later on the resulting channel paths to perform arbitrarily many peer-to-peer transactions off-chain. While significant progress has been made in terms of proof techniques for off-chain protocols, existing approaches do not capture the game-theoretic incentives at the core of their design, which led to overlooking significant attack vectors like the Wormhole attack in the past. This work introduces the first game-theoretic model that is expressive enough to reason about the security of off-chain protocols. We advocate the use of Extensive Form Games - EFGs and introduce two instances of EFGs to capture security properties of the closing and the routing of the Lightning Network. Specifically, we model the closing protocol, which relies on punishment mechanisms to disincentivize the uploading on-chain of old channel states, as well as the routing protocol, thereby formally characterizing the Wormhole attack, a vulnerability that undermines the fee-based incentive mechanism underlying the Lightning Network.