Daric: A Storage Efficient Payment Channel With Penalization Mechanism

Lightning Network (LN), the most widely deployed payment channel for Bitcoin, requires channel parties to generate and store distinct revocation keys for all n payments of a channel to resolve fraudulent channel closures. To reduce the required storage in a payment channel, eltoo introduces a new signature type for Bitcoin to enable payment versioning. This allows a channel party to revoke all stale payments by using a payment with a higher version number, reducing the complexity of storage from $\mathcal{O}(n)$ to $\mathcal{O}(1)$. However, eltoo lacks a penalization mechanism, which may incentivise profit-driven channel parties to close a payment channel with a stale payment state, to their own advantage. This paper introduces Daric, a payment channel for Bitcoin that simultaneously disincentivize profit-driven attackers and achieves optimal storage. In addition, to achieve higher efficiency and robustness, Daric does not rely on any particular properties of the underlying digital signature to prevent state duplication.