SoK: A Taxonomy for Layer-2 Scalability Related Protocols for Cryptocurrencies

Abstract Blockchain-based systems, in particular cryptocurrencies, face a serious limitation: scalability. This holds, especially, in terms of the number of transactions per second. Several alternatives are currently being pursued by both the research and practitioner communities. One venue for exploration is on protocols that do not constantly add transactions on the blockchain and therefore do not consume the blockchain’s resources. This is done using off-chain transactions, i.e. , protocols that minimize the interaction with the blockchain, also commonly known as Layer-2 approaches. This work relates several existing off-chain channel methods, also known as payment and state channels, channel network construction methods, and other components such as channel and network management protocols, e.g. , routing nodes. All these components are crucial to keep the usability of the channel and are often overlooked. In this work, we propose a taxonomy for all the components of Layer-2. We provide extensive coverage of the state-of-the-art protocols available outline their respective approaches, and discuss their advantages and disadvantages.