eltoo: A Simple Layer2 Protocol for Bitcoin

Christian Decker, Rusty Russell, Olaoluwa Osuntokun • 30 April 2018

Abstract

Bitcoin, and other blockchain based systems, are inherently limited in their scalability. On-chain payments must be verified and stored by every node in the network, meaning that the node with the least re- sources limits the overall throughput of the system as a whole. Layer 2, also called off-chain protocols, are often seen as the solution to these scalability issues: by renegotiating a shared state among a limited set of participants, and not broadcasting the vast majority of state up- dates to the blockchain, the load on the network is reduced. Central to all Layer 2 protocols is the issue of guaranteeing that an old state may not be committed once it has been replaced. In this work we present eltoo, a simple, yet powerful replacement mechanism for Layer 2 protocols. It introduces the idea of state numbers, an on-chain en- forceable variant of sequence numbers that were already present in the original implementation, but that were not enforceable.