Celer Network: A High-Performance Layer-2 Scaling Platform

Celer Network is a high-performance Layer-2 scaling platform that aims to bring internet-scale to blockchain through technological innovation and facilitate the commercialization of blockchain technology. Built upon traditional blockchain solutions, it proposes new technological solutions and economic models that have demonstrated orders of magnitude performance improvements in experimental simulations.

CELR Token, the native token of Celer Network, can be used as collateral for liquidity lending and anti-fraud bonds, as payment for channel registration fees, and as currency for transaction fees and other potential services. In the first 5 years of the system's operation, new CELR tokens will be generated through Proof of Liquidity Commitment (PoLC) mining. During this period, Liquidity Backing Assets (LiBAs) only need to be pledged, and the CELR tokens will still belong to the lender after the pledge period. After the 5-year PoLC mining period ends, the system will start consuming CELR tokens. The consumed CELR tokens will not be returned to the lender but will be injected into the system as continuous PoLC mining rewards.

Project Vision

Celer Network is a unified technological and economic architecture that leverages off-chain scaling techniques to bring internet-scale to existing and future blockchains. It is horizontally scalable, trustless, distributed, and privacy-preserving. Celer Network comprises a layered architecture with significant technological innovations in each layer. Additionally, it advocates a principled off-chain crypto-economic design to balance its scalability. Celer Network's mission is to unleash the full potential of blockchain and innovate how distributed applications are built and used.

Project Highlights

Off-chain scaling technology allows mutually distrusting parties to interact with smart contracts off-chain instead of on-chain. Participants jointly maintain and individually replicate a tamper-proof, multi-signature off-chain state machine, resorting to on-chain consensus only when absolutely necessary (e.g., when multiple parties cannot reach an agreement).

Off-chain scaling is the only way to achieve horizontally scalable and privacy-preserving distributed applications (dApps) while preserving the trustless and decentralized nature of blockchain. It is a turning point in the mass adoption of blockchain technology and will become the engine and cornerstone of all scalable dApps.

Application Scenarios

Celer Network's crypto-economic mechanism, cEconomy, is designed based on a fundamental principle: a good crypto-economic model (token model) should provide additional value and introduce new game theory dynamics; otherwise, it is not good or useless. However, any off-chain solution that addresses scalability issues involves trade-offs. If the solution lacks a crypto-economic mechanism to balance these trade-offs with new dynamics, it will not be adopted.

New Trade-offs

Everything comes at a price. Off-chain platforms achieve scalability by making the following trade-offs:

Off-chain Scalability vs. Liquidity:
Off-chain operation networks first achieve scalability by sacrificing the liquidity of the on-chain network. This is particularly challenging for potential off-chain service providers, as significant liquidity is needed to provide efficient state channel services. However, large holders of crypto assets may lack the business interest or technical capability to build the infrastructure for a state channel service. Those who can build reliable and scalable state channel services often do not have such large amounts of funds to deposit into channels or fraud-proof bond contracts. This mismatch poses a significant obstacle to the technological development and widespread adoption of off-chain operation networks.

Off-chain Scalability vs. Availability:
While off-chain scaling does not compromise the trustless nature of blockchain, it does sacrifice availability. Each state channel or off-chain contract is associated with a time limit. If one party remains offline for an extended period and exceeds this limit, the other parties involved are at risk or may lose the current state.

Therefore, we need an incentive mechanism to provide sufficient liquidity and help entities capable of running reliable and scalable offline service infrastructure ensure that the offline state is always available for potential on-chain disputes.

New Crypto-Economics

To complete the off-chain scaling solution, Celer Network introduces cEconomy, a crypto-economic mechanism that utilizes the Celer Network protocol token (CELR) and three tightly coupled components to provide network effects, stable liquidity and high availability, and indispensable value.

Proof of Liquidity Commitment (PoLC):
PoLC is a virtual "mining" process that enables the off-chain ecosystem to achieve abundant and stable liquidity. Anyone can participate by simply locking their idle liquidity for a period of time to earn rewards.

Liquidity Backing Auction (LiBA):
LiBA allows off-chain state channel service providers to obtain liquidity by obtaining "crowdfunding loans" at a negotiated interest rate. Lenders are prioritized based on "happiness scores," which are determined by the desired interest rate, the amount of liquidity provided, and the number of CELR tokens held. Lenders with more CELR tokens (as an indicator of their past contributions to the ecosystem) have higher priority.

State Guardian Network (SGN):
SGN is a special and rigorous sidechain that safeguards users' states while they are offline, ensuring that their states are always available for dispute resolution. State guardians need to lock their CELR tokens into SGN to become eligible guardians and earn service fees.

Technical Overview

As a comprehensive platform built on existing or future blockchains, Celer Network features a clear layered architecture that separates the complex off-chain platform into modular layers. This architecture significantly reduces the complexity of system design, development, and maintenance, allowing for easy iteration and adaptation of each component.

A well-designed layered architecture should have open interfaces, encouraging different implementations at each layer as long as they support the same cross-layer interface. Each layer only needs to focus on implementing its own functionality. Inspired by the layered design of the internet's success, Celer Network adopts an off-chain technology stack that can be built on different blockchains, named cStack, which consists of the following layers, arranged from bottom to top:

cChannel: Generalized state channel and sidechain suite
cRoute: Optimal value transfer routing
cOS: Development framework and runtime environment for off-chain applications

The Celer architecture provides innovative solutions for all layers. Below we elaborate on the technical challenges and key features of cChannel, cRoute, and cOS.

cChannel

This layer is closest to the underlying blockchain, directly interacts with the base public chain, and provides real-time state updates to the upper layers with a common abstract structure within a limited time frame. cChannel utilizes state channel and sidechain technologies, which are the cornerstones of the off-chain scaling platform.

State channels allow mutually distrusting parties to quickly agree on the latest agreed-upon state on an off-chain program, with the on-chain bond contract guaranteeing its tamper-proof security. This concept was initially introduced by the Lightning Network to support high-throughput, off-chain microtransactions for Bitcoin. Since the proposal of the Lightning Network, several research efforts have addressed various issues in the context of payment channel networks, such as routing algorithms and timelock optimization. However, off-chain networks are still in their early stages of development and face significant challenges in terms of modularity, flexibility, and cost-effectiveness. cChannel addresses these current challenges by creating a series of new features.

Generalized Off-chain State Transfer:
Off-chain transfers can be any state transfer that relies on DAG. This allows Celer Network to support complex, high-performance offline dApps such as gaming, online auctions, insurance, market prediction, and decentralized exchanges.

Flexible and Efficient Value Transfer:
Provides multiple state channel and sidechain structures, diverse efficiency and tamper-proof trade-off strategies to support fast value transfers with general conditions, minimized on-chain interactions, and minimal fund locking.

Pure Off-chain Contracts:
Any contract not directly related to on-chain deposits does not require any on-chain operations or initialization unless a dispute arises. Each pure off-chain contract or object has a uniquely identifiable off-chain address that is deployed on the blockchain only when needed and assigned an on-chain address by a built-in off-chain address translator.

cRoute

Celer Network is a highly scalable dApps platform, and one of its most important promises is to provide high-throughput value transfer on the platform. Off-chain value transfer is a fundamental requirement for many off-chain applications. While Celer Network has a grander vision than just payment solutions, it still makes groundbreaking improvements to off-chain payment routing as it directly determines how much value can be transferred within the ecosystem and how fast it can be transferred.

All existing off-chain payment routing methods can be attributed to traditional "shortest path routing" algorithms, which may lead to poor performance of off-chain payment networks due to fundamental differences in path models. The path capacity of computer networks is stable and stateless (not affected by past transmissions). However, the path capacity of off-chain payment networks is stateful (i.e., determined by on-chain deposits and past payments), which leads to constantly changing topologies and link states in highly dynamic networks. This makes it difficult for traditional shortest path algorithms to converge, resulting in low throughput, high latency, and even outages.

Celer Network's payment routing module recognizes this fundamental challenge. cRoute introduces a distributed routing balancing algorithm (DBR) using distributed congestion gradients.

Provably Optimal Throughput:
We prove that for any payment transaction request rate, if there is a routing algorithm that can support that rate, DBR is guaranteed to find it. Our evaluation shows that DBR achieves up to 15x higher throughput and 20x better channel utilization compared to state-of-the-art solutions.

Transparent Channel Balancing:
Since the "Lightning Network", "keeping channels balanced" has been an intuitive thing to do. However, existing attempts are exploratory, coordinating a large number of on-chain or off-chain operations to achieve low guaranteed balance. DBR combines the channel balancing process with routing and keeps the network balanced without any additional coordination.

Fully Decentralized:
The DBR algorithm is a fully decentralized algorithm where each node only needs to communicate with its neighbors in the state channel network topology. The messaging overhead of DBR in the protocol is also low.

Fault Tolerance:
The DBR algorithm is highly resilient to failures: it can quickly detect and adapt to unresponsive nodes, supporting the maximum possible throughput on the remaining available nodes.

Privacy Preservation:
Due to its multi-path nature, the DBR algorithm naturally preserves privacy about the value being transferred without the use of any additional privacy-preserving techniques (such as ZKSNARK). More importantly, the DBR algorithm can be seamlessly integrated with onion routing to protect the anonymity of both the source and destination.

cOS

While on-chain dApps are simply front-ends connected to the blockchain, off-chain dApps, although having the huge potential of high scalability, are not easy to build on traditional public chains. Celer Network introduces cOS, a development framework that makes it easy for anyone to develop, operate, and interact with scalable off-chain dApps, reducing the extra complexity brought by off-chain scaling. Celer Network allows developers to focus more on developing application logic and creating the best user experience, while cOS handles the heavy lifting, including the following tasks:

• Identify dependencies between arbitrary off-chain and on-chain states.

• Handle off-chain state tracking, storage, and dispute resolution.

• Provide fault tolerance and transparency for intermediary node failures.

• Support multiple concurrent off-chain dApps.

• Provide unified implementation across different on-chain and off-chain modules.

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