You Sank My Battleship! A Case Study to Evaluate State Channels as a Scaling Solution for Cryptocurrencies

Off-chain protocols (or so-called Layer 2) are heralded as a scaling solution for cryptocurrencies. One prominent approach, state channels, allows a group of parties to transact amongst themselves and the global blockchain is only used as a last resort to self-enforce any disputed transactions. To evaluate state channels as a scaling solution, we provide a proof of concept implementation for a two-player battleship game. It fits a category of applications that are not considered reasonable to execute on the blockchain, but it is widely perceived as an ideal application for off-chain protocols. We explore the minimal modifications required to deploy the battleship game as a state channel and propose a new state channel construction, Kitsune, which combines features from existing constructions. While in the optimistic case we demonstrate the battleship game can be played efficiently in a state channel, the requirement for unanimous off-chain agreement introduces new economic and time-based attacks that can render the game as unreasonable to play.