Second-layer or off-chain protocols increase the throughput of permissionless blockchains by enabling parties
to lock funds into smart-contracts and perform payments through peer-to-peer communication, only resorting to the smart-contracts for protection against fraud. Current protocols have fixed time periods during which participants can dispute any fraud attempts. However, current blockchains have limited transaction processing capacity, so a fixed dispute period will not always be sufficient to deter all fraudulent behaviour in an off-chain protocol. In this work, we describe how to set adaptive dispute periods that accommodate the congestion and capacity of the underlying blockchain. Adaptive dispute periods ensure that users retain the opportunity to dispute fraudulent behaviours during blockchain congestion, while increasing second-layer protocol efficiency by reducing dispute period lengths when the number of disputes is low. We describe a non-interactive argument system for setting adaptive dispute periods under the current Ethereum Virtual Machine, and discuss how to efficiently integrate built-in support for adaptive dispute periods in any blockchain. We empirically demonstrate that an adaptive-dispute second-layer protocol can handle a larger number of disputes and prevent more fraud than its non-adaptive counterparts even when users are slow to issue disputes, due to denial of service or blockchain congestion.

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