Researchers developed a Protocol for Secure and Faster Transactions in Cryptocurrencies

Researchers developed a Protocol for Secure and Faster Transactions in Cryptocurrencies

Researchers from the TU Wien’s research unit ‘Security and Privacy’ (Lukas Aumayr and his supervisor Prof. Matteo Maffei), in collaboration with the IMDEA Software Institute (Prof. Pedro Moreno-Sanchez, previously a postdoc at TU Wien) and Purdue University (Prof. Aniket Kate), have developed a protocol that allows for more secure and faster transactions in cryptocurrencies such as Bitcoin.

In cities such as Tokyo, we can now subsist on cryptocurrencies such as Bitcoin. If you only have Bitcoin in your (electronic) wallet, you can buy a coffee, go shopping, take the bus, pay a taxi, or even buy a meal. This may appear strange to some European countries, despite the fact that there are many cryptocurrencies on the market, such as ATM and coinradar (Spanish market), but we are moving steadily toward that model, which may or may not coexist with our bank cards in the future.

The popularity of cryptocurrencies is rapidly growing due to their numerous advantages over traditional payment methods such as Mastercard or Visa. Transactions are typically anonymous, decentralized, and global in nature. However, there is still work to be done in terms of security, privacy, and efficiency. Fraud is possible, users may discover information about other users that should be kept private, the number of transactions is limited, and delays do occur from time to time.

Recognizing these issues, researchers from the IMDEA Software Institute, TU Wien, and Purdue University created an improved protocol. The article that inspired these ideas will be presented at the USENIX Security Symposium 2021, one of the best IT security conferences in the world.

The popularity of cryptocurrencies is increasing very fast. Researchers have jointly developed a protocol that makes more secure and faster transactions in cryptocurrencies like Bitcoin.

The bottleneck of Bitcoin

“It’s long been known that Bitcoin and other blockchain technologies have a scalability issue: there can only be a maximum of ten transactions per second,” Aumayr says. “That’s a small number when compared to credit card companies, which process tens of thousands of transactions per second around the world.” The “Lightning Network”—an additional network of payment channels between blockchain users—is one approach to solving this problem. For example, if two people want to process a large number of transactions in a short period of time, they can exchange payments directly between themselves without each individual transaction being published on the blockchain. Only at the beginning and at the end of this series of transactions is there an official entry in the blockchain.

The apparent privacy gain of the Lightning Network due to off-chain payments isn’t real, as demonstrated by Moreno-other Sanchez’s works. Indeed, Moreno-previous Sanchez’s work has shown that payment intermediaries can learn who pays what to whom. This is a problem that must be addressed before a system like Lightning Network can be widely adopted.

The second major issue is that “Furthermore, everyone in this chain is required to contribute a certain amount of money, which is secured as collateral. When a transaction fails, a large sum of money can be held for an extended period of time—the more people involved, the longer it will take “Moreno-Sanchez adds.

A new protocol for faster, safer crypto transactions

Mathematically ruling out vulnerabilities

“This project has advanced the theoretical and practical state of off-chain payments. From a theoretical standpoint, we have provided a formal model of the new payment system, mathematically proving its correctness and security against an adversary. Furthermore, whereas the current Lightning Network requires two rounds of communication between all participants in a payment, Blitz (the new protocol) reduces it to a single round of communication. This is a significant achievement because the Lightning Network and other approaches proposed thus far have all used two rounds, and it was unclear whether we would be able to overcome this barrier “in the words of an IMDEA Software researcher.

“In practice, a single round of communication implies significant benefits in terms of practicality,” Aumayr says. “The money is locked in the first round, then released—or refunded if there are any issues. This could result in an additional day of delay for each user in the chain. The communication chain only needs to be run through once with our protocol.”

Simulation proves practicality

However, it is not only the new protocol’s fundamental logical structure that is important, but also its practicability. As a result, the team simulated how the new technology behaves in a payment channel network in comparison to the previous Lightning network. The benefits of the new protocol became clear: depending on the situation, such as the number of attacks and fraud attempts, the new protocol results in 4 to 33 fewer failed transactions than the conventional Lightning network.

Moreno-Sanchez and Aumayr are working hard to share their findings with Lightning Network developers and other Bitcoin organizations. One of the most appealing features so far is that Blitz is completely backwards compatible with existing technologies and could be deployed immediately as a more secure and faster alternative for off-chain payments.