# The Merchant: Avoiding Payment Channel Depletion through Incentives

arXiv: https://arxiv.org/abs/2012.10280 · HTML: https://mlsanity.com/paper/2012.10280/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 18 Dec 2020.

## Built on by (most cited first, 1 of 1)

- [Deep Reinforcement Learning-based Rebalancing Policies for Profit Maximization of Relay Nodes in Payment Channel Networks](https://mlsanity.com/paper/2210.07302/) (2022)

## Abstract (arXiv)

Payment channels networks drastically increase the throughput and hence scalability of blockchains by performing transactions off-chain. In an off-chain payment, parties deposit coins in a channel and then perform transactions without invoking the global consensus mechanism of the blockchain. However, the transaction value is limited by the capacity of the channel, i.e., the amount of funds available on a channel. These funds decrease when a transaction is sent and increase when a transaction is received on the channel. Recent research indicates that there is an imbalance between sending and receiving transactions, which leads to channel depletion in the sense that one of these operations becomes impossible over time due to the lack of available funds. We incentivize the balanced use of payment channels through fees. Whereas the current fee model depends solely on the transaction value, our fee policies encourage transactions that have a positive effect on the balance in a channel and discourage those that have a negative effect. This paper first defines necessary properties of fee strategies. Then, it introduces two novel fees strategies that provably satisfy all necessary properties. Our extensive simulation study reveals that these incentives increase the effectiveness of payments by 8% to 19%.