Smart contracts are self-executing agreements written in program code and are envisioned to be one of the main applications of blockchain technology. While they are supported by prominent cryptocurrencies such as Ethereum, their further adoption is hindered by fundamental scalability challenges. For instance, in Ethereum contract execution suffers from a latency of more than 15 s, and the total number of contracts that can be executed per second is very limited. State channel networks are one of the core primitives aiming to address these challenges. They form a second layer over the slow and expensive blockchain, thereby enabling instantaneous contract processing at negligible costs.
In this work we present the first complete description of a state channel network that exhibits the following key features. First, it supports virtual multi-party state channels, i.e. state channels that can be created and closed without blockchain interaction and that allow contracts with any number of parties. Second, the worst case time complexity of our protocol is constant for arbitrary complex channels. This is in contrast to the existing virtual state channel construction that has worst case time complexity linear in the number of involved parties. In addition to our new construction, we provide a comprehensive model for the modular design and security analysis of our construction.