Application and Evaluation of Payment Channel in Hybrid Decentralized Ethereum Token Exchange

Traditional centralized token exchange (CEX) has been suffering from hacking due to the centralized management of users’ tokens. In contrast, decentralized token exchange (DEX) maintains users’ assets by smart contracts in a decentralized manner, but introduces additional overhead in terms of gas fee and transaction confirmation latency. Hybrid decentralized token exchange (HEX) has been proposed to combine the benefits of CEX and DEX. However, existing HEX is criticized for two issues. First, trading transactions are time-consuming and expensive for frequent token traders. Second, excessive simultaneous transactions might cause the pending transaction congestion in the Ethereum network. In this paper, we propose a payment channel based HEX, which extends existing solutions by adding a new payment channel layer to benefit frequent traders and alleviate the pending transaction congestion. Besides, we propose the very first gas-price vs. transaction-confirmation-latency function to guide Ethereum transaction issuers to choose an optimal gas price that minimizes the overall cost. Extensive simulations are conducted to compare the cost in the proposed HEX with that in the conventional HEX. The results demonstrate the effectiveness of our proposed mechanism in terms of reducing gas fees and transaction confirmation latency for frequent traders as well as the pending transaction congestion in Ethereum.

Journal Article
Tuesday, December 01, 2020