A Game-Theoretic Analysis of Cross-Ledger Swaps with Packetized Payments

We propose a game-theoretic framework to study the outcomes of packetized payments - a cross-ledger transaction protocol - with strategic and possibly malicious agents. We derive the transaction failure rate and demonstrate that packetized payments are likely to be incomplete, at least without disciplinary mechanisms. Our analysis suggests that collateral deposits can prevent malicious agents to take advantage of the protocols, and we infer that the deposit amount should depend on the underlying asset price volatility or that it should be dynamically adjusted as the prices changes.