Off-chain Transactions Research Articles

Exploring the Efficiency of Off-Chain vs. On-Chain Transactions in Blockchain Network

Blockchain technology, which offers decentralised, safe, and transparent systems, has completely changed the financial and digital transaction industries. Nevertheless, given the rising use of cryptocurrencies, there are still major issues with transaction speed and scalability. This study explores the workings of blockchain networks' off-chain and on-chain transaction processes, exploring the reasons for the frequent speed and accessibility advantages of off-chain transactions over on-chain ones. This research paper delves into the mechanisms of off-chain and on-chain transactions within blockchain networks, examining why off-chain transactions are often faster and more accessible compared to their on-chain counterparts. This paper sheds light on the efficiency gap between off-chain and on-chain transactions in cryptocurrency networks, through a comprehensive analysis of the underlying technology, scalability solutions, and practical applications.

Blockchain integration in healthcare: a comprehensive investigation of use cases, performance issues, and mitigation strategies.

Healthcare is a critical area where blockchain technology (BT) is being heralded as a potential game-changer for facilitating secure and efficient data sharing. The purpose of this review is to examine BT applications, performance challenges, and solutions in healthcare. To begin, This review paper explores popular blockchain networks for data exchange, encompassing both public and permissioned platforms, such as Ethereum and Hyperledger Fabric. This paper analyzes the potential applications of BT's decentralized, immutable, and smart contract capabilities in healthcare settings, including secure and interoperable health data exchange, patient consent management, drug supply chain oversight, and clinical trial management. The healthcare industry might greatly benefit from the increased privacy, transparency, and accessibility that these technologies provide. Despite BT's promising medical uses, the technology is not without its drawbacks. High energy consumption, throughput, and scalability are all concerns. We wrapped up by discussing the solutions that have been implemented, including consensus processes, scalability measures like sharding, and off-chain transactions that are designed to mitigate the drawbacks.

Enhancing Health Product Traceability on the Blockchain: A Novel Approach for Supply Chain Management inspection to AI

INTRODUCTION: Blockchain technology is being investigated as a viable solution due to the industry's growing requirement for accountability and traceability. This study describes a fresh method for tracking down medical products that makes use of a decentralised smart contract network set up on the Ethereum blockchain. In order to enable secure and auditable tracking of health products throughout their lifecycle, the suggested system, named "HealthProductTraceability," makes use of the transparency and immutability of blockchain. 
 OBJECTIVES: The system uses a "Product" struct to hold pertinent data such the product name, batch number, temperature, producer, and distributors. To quickly get product information depending on the batch number, a mapping is used. The use of tools to manufacture items, send them to distributors, and market them is one significant contribution of this research.By demanding validation tests, such as verifying that batch numbers are unique and exist before carrying out certain activities, these functions protect the integrity of the traceability system. 
 METHODS: In order to enable interested parties to track the product's travel and temperature changes, the system additionally emits events for product manufacture, distribution, and temperature adjustments. The suggested system is innovative because it can track the temperature of health items from beginning to end on a decentralised, open platform. 
 RESULTS: By utilising blockchain technology, the system lessens reliance on centralised authorities, fosters stakeholder trust, and minimises the likelihood of fraud, forgery, and tampering in the supply chain for health products. The contract's architecture recognises some of the issues with blockchain technology, including scalability and privacy. By investigating solutions like sidechains, off-chain transactions, and enhancements to consensus methods, scalability issues are solved.
 CONCLUSION: In summary, the suggested HealthProductTraceability system offers a creative and practical solution to the traceability issues facing the health product sector. The solution provides improved transparency, security, and accountability by utilising blockchain technology, paving the path for a more dependable and trustworthy health product supply chain. To increase the system's usefulness and adoption in real-world circumstances, further research can investigate scalability and privacy issues.

Zk-SNARKs-Based Anonymous Payment Channel in Blockchain

Payment channels serve as an effective solution to the scalability problem of cryptocurrencies, which significantly increase transaction rates by allowing users to conduct large-scale offline transactions off-chain without posting everything to the blockchain. However, the existing payment channels lack privacy protection for the transaction amount and the linking relationship between the two parties to the transaction. Therefore, in order to address the scalability and privacy issues of cryptocurrencies such as Bitcoin, this paper proposes a zk-SNARKs-based anonymous payment channel (zk-APC), which supports an unlimited number of off-chain payments between the payer and the payee and protects the privacy of the participants. Specifically, the proposed scheme achieves relational anonymity and amount privacy for both on-chain and off-chain transactions in the payment channel through utilizing zero-knowledge proof (zk-SNARKs) and commitment schemes. This paper proves that the proposed method is more effective than similar schemes through a performance evaluation.

A Blockchain-Based Method for Optimizing the Routing of High-Frequency Carbon-Trading Payment Channels

Carbon trading is an effective way to achieve carbon neutrality. It is a market mechanism aimed at reducing global greenhouse gas emissions and carbon dioxide emissions. Blockchain technology can be applied to the carbon-trading scenario using characteristics that guarantee the security, decentralization, data immutability, and data traceability of the carbon-trading process. It would be difficult to implement carbon trading on blockchains for all enterprises and individuals, as the current performance of blockchains does not meet the requirements. There has been extensive research conducted on blockchain performance optimization, and the off-chain payment channel is one of the more mature solutions. This approach involves the transfer of transactions to off-chain transactions, thus avoiding high transaction fees. Existing research has addressed the problem of routing security and efficiency, with less emphasis on factors such as routing transaction costs, node reputation, and routing path considerations. This paper researches the optimization of payment routing in Payment Channel Networks (PCNs) and proposes the Multi-Factor Routing Payment Scheme (MFPS), which integrates factors such as the node reputation, transaction fee cost, and distance to select the route for payment transactions. In order to improve the success ratio of routing transactions, the transaction-splitting algorithm is proposed. To ensure the security and privacy of the transaction process, the Asymmetric Time-Lock Contract (ATLC) protocol is proposed. The results of extensive experimental simulations show that the MFPS proposed in this paper outperforms the ShortestPath, Cheapest, and SplitDistance algorithms. It achieves an approximately 13.8%∼49% improvement in the transaction success ratio and reduces the average transaction processing cost. The security and privacy measures can defend against wormhole and double-flower attacks and exhibit better performance in terms of computational verification and message overhead.

CryptoMaze: Privacy-Preserving Splitting of Off-Chain Payments

Payment protocols developed to realize off-chain transactions in Payment channel network (PCN) assumes the underlying routing algorithm transfers the payment via a single path. However, a path may not have sufficient capacity to route a transaction. It is inevitable to split the payment across multiple paths. If we run independent instances of the protocol on each path, the execution may fail in some of the paths, leading to partial transfer of funds. A payer has to reattempt the entire process for the residual amount. We propose a secure and privacy-preserving payment protocol, CryptoMaze. Instead of independent paths, the funds are transferred from sender to receiver across several payment channels responsible for routing, in a breadth-first fashion. Payments are resolved faster at reduced setup cost, compared to existing state-of-the-art. Correlation among the partial payments is captured, guaranteeing atomicity. Further, two party ECDSA signature is used for establishing scriptless locks among parties involved in the payment. It reduces space overhead by leveraging on core Bitcoin scripts. We provide a formal model in the Universal Composability framework and state the privacy goals achieved by CryptoMaze. We compare the performance of our protocol with the existing single path based payment protocol, Multi-hop HTLC, applied iteratively on one path at a time on several instances. It is observed that CryptoMaze requires less communication overhead and low execution time, demonstrating efficiency and scalability.

Cross-Chain Virtual Payment Channels

With the emergence of countless independent blockchain systems in recent years, cross-chain transactions have attracted considerable attention, and lots of solutions have been put forth by both industry and academia. However, most of the existing solutions suffer from either centralization or scalability issues. To mitigate these issues, in this paper, we propose the concept of cross-chain virtual payment channels, which allows two users in different blockchain systems to conduct limitless off-chain transactions with the help of an intermediate node, hence solving the centralization and scalability issues. Furthermore, as the intermediate node is only involved in the channel open and close operations, it further improves the efficiency of cross-chain transactions, and to a certain extent, it even enhances the privacy of the cross-chain transaction. Meanwhile, we also present the first concrete cross-chain virtual payment channel scheme, which only requires one of the blockchain systems supporting the Turing-complete scripting language. The corresponding detailed security analysis in the Universal Composability framework demonstrates that our proposal holds the Consensus on Open, Update, and Close. Finally, we implement and deploy our cross-chain virtual payment channel scheme on the Ethereum and Bitcoin test networks. The extensive experimental results show that our proposal dramatically improves the efficiency of cross-chain transactions, and the advantage becomes more pronounced as the number of transactions increases.

Anti-Collusion Multiparty Smart Contracts for Distributed Watchtowers in Payment Channel Networks

Leveraging watchtowers to monitor payment channel networks (PCNs) is regarded to be a promising option to ensure off-chain transaction security and boost cryptocurrency scalability. However, existing solutions have two major limitations: First, since the watchtower’s inaction or collusion with counterparties, the deposits in off-chain transactions will be threatened; Second, due to occasional false positives, the efficiency of the single watchtower in monitoring the payment channels for fraud is questionable. To solve this, we present anti-collusion multiparty smart contracts for distributed watchtowers in PCNs. Specifically, we first design the distributed watchtower mechanism to solve the false positive problem in regulating PCNs. In addition, we utilize smart contracts to constrain and force counterparties to relinquish collusion in the distributed watchtower mechanism, thus making collusion impossible for rational parties. We further offer a mathematical proof and contract implementation in Solidity. Finally, extensive experiments and contracts executed on Ethereum under various benchmarks with baseline comparison demonstrate the validity of our proposals. Specifically, our scheme can both improve the throughput and accuracy by up to 20-25% and 10-15%, respectively, and reduce the false positive rate by up to 10% compared with existing single watchtower mechanism.

Hiding payments in lightning network with approximate differentially private payment channels

Payment Channel Networks (PCN) form a class of techniques created to solve the scalability problems that permissionless blockchains such as Bitcoin face. The Lightning Network (LN) is the biggest PCN to date. As of September 2021, LN is an interconnected network with 27 thousand nodes and 71 thousand channels, representing a total payment capacity of 2500 bitcoins (114M USD). LN nodes establish trustless payment channels by locking funds in a funding transaction. The distribution of the funds can be modified with near-instant transactions without broadcasting them to the blockchain. By chaining channels together, it is possible for two nodes to transact without having a direct channel between them. This results in far fewer transactions needing to be broadcast and a theoretical number of off-chain transactions per second that can rival established, centralized payment systems. With off-chain transactions one can obtain more privacy than with on-chain transaction: individual payments through LN should be able to stay private. However, recent research suggests that this is not the case. Several works have shown that channel balances can be tracked with the Balance Discovery Attack (BDA). Monitoring the changes in channel balances over time enables an adversary to track individual payments in LN. Since payments can travel through channels outside the scope of influence of the payer or the payee, these BDA’s form an Interdependent Privacy (IDP) risk for the participants of the LN network. This work applies approximate differential privacy to hide payment amounts of a realistic size in LN. To our knowledge, this is the first time that strong privacy guarantees in the sense of approximate differential privacy are achieved in the setting of LN. We prove the feasibility with our prototype, compatible with LN today. Our solution is evaluated in terms of cost and utility and we show that the latter is not affected by our solution.

Proof of Delivery Smart Contract for Performance Measurements

The growth of the enterprise blockchain research supporting supply chain management calls for investigations of their impact and mindfulness of their design, use cases, and pilots. With a blockchain design for the Proof of Delivery (PoD) process management, this paper contributes to learning about performance measurement and the transaction costs implications during the development and application of smart contracts. An experimental design science approach is applied to develop an open-source blockchain to explore ways to make the delivery processes more efficient, the proof of delivery more reliable, and the performance measurements more accurate. The theory of Transaction Costs is applied to evaluate the cost implications of the adoption of smart contracts in the management of the PoD. The findings show that smart contracts make the delivery processes more efficient and proof of delivery more reliable. Yet, the methods and metrics are too complex and qualitative, limiting the smart contract’s capability to measure performance. Our findings indicate potential transaction costs reduction by implementing a blockchain-based performance measurement. The complexities of the delivery process and proof of delivery call for pre-contractual steps to identify the processes and performance metrics to design blockchains. Smart contracts need further development and digital aids to handle qualitative inspections and proof of delivery generation during the delivery process. The blockchain requires the system’s capacity to record off-chain transactions, such as in case of disputes resolutions. The authors extended blockchain research beyond the theoretical level, designing an open-source blockchain for supply chain management within the use case, pilot design, and case study.

Security Data Sharing of Shipbuilding Information Based on Blockchain

The shipbuilding industry has problems such as long transaction cycles, many participating suppliers, and data sensitivity. A time-dimensional shipbuilding information security sharing scheme based on an alliance chain is proposed to solve this problem. The blockchain can better deliver value and protect user privacy, the blockchain can directly complete the instant transfer of value through smart contracts and tokens on the blockchain. We divide the program into three parts: data preprocessing, data storage, and data sharing. For data sensitivity, data confidentiality and reliability are handled separately. Aiming at the problem of user privacy leakage in data storage, a privacy-protecting blockchain shared storage solution is proposed; for deduplication, two deduplication algorithms between storage nodes and within storage alliances are proposed to ensure Data information is not disclosed. Storage nodes are allowed to perform data deduplication, data sharing and down-loading, and use off-chain transactions to solve the blockchain performance problems caused by frequent transactions. The scheme in this paper carries out theoretical analysis from three aspects of correctness, security and performance. Finally, this paper has carried out a comparative experimental analysis on the scheme, and the experimental results show that the proposed scheme is feasible and efficient.

Розробка протоколу платіжних каналів на блокчейні Stellar

The article is devoted to the topic of payment channels and their practical implementation in the Stellar blockchain. The general idea of payment channels and technical details that are inherent in their implementation in the Stellar blockchain are described. The technical details of the Stellar blockchain are given, namely the Stellar accounts, transactions and operations are described. The types of stellar operations that will be used in the article are given. It describes in detail what properties a transaction must satisfy in order to be considered correct from the point of view of a stellar blockchain. The protocol of payment channels on a stellar blockchain is described, the corresponding diagrams are given. The main actors and elements of payment channels are described. The role of the respective accounts is explained, namely the host account, the guest account and the escrow account. The role of the transactions used in the protocol is explained, namely the funding transaction, the bump sequence transaction and the settlement transaction. The scheme shows the order in which transactions are published. The process of exchanging off-chain transactions is described in detail. To illustrate the dependence of transactions on each other, a diagram of positive and negative cases of publication of transactions is given. The last section discusses the mechanism for invalidating obsolete commitment transactions through time limits on the publication of transactions. The timing chart shows which transactions can be published at a specific point in time. The need for a time delay between the publication of a bump sequence transaction and a settlement transaction is explained. The need to use the properties of the sequence number of the account and transactions is explained.

3-of-3 multisignature approach for enabling lightning network micro-payments on IoT devices

Bitcoin's success as a cryptocurrency enabled it to penetrate into many daily life transactions. Its problems regarding the transaction fees and long validation times are addressed through an innovative concept called the Lightning Network (LN) which works on top of Bitcoin by leveraging off-chain transactions. This made Bitcoin an attractive micropayment solution that can also be used within certain IoT applications (e.g., toll payments) since it eliminates the need for traditional centralized payment systems. Nevertheless, it is not possible to run LN and Bitcoin on resource-constrained IoT devices due to their storage, memory, and processing requirements. Therefore, in this paper, we propose an efficient and secure protocol that enables an IoT device to use LN's functions through a gateway LN node even if it is not trusted. The idea is to involve the IoT device only in signing operations, which is possible by replacing LN's original 2-of-2 multisignature channels with 3-of-3 multisignature channels. Once the gateway is delegated to open a channel for the IoT device in a secure manner, our protocol enforces the gateway to request the IoT device's cryptographic signature for all further operations on the channel such as sending payments or closing the channel. LN's Bitcoin transactions are revised to incorporate the 3-of-3 multisignature channels. In addition, we propose other changes to protect the IoT device's funds from getting stolen in possible revoked state broadcast attempts. We evaluated the proposed protocol using a Raspberry Pi considering a toll payment scenario. Our results show that timely payments can be sent and the computational and communication delays associated with the protocol are negligible.

A scalable private Bitcoin payment channel network with privacy guarantees

While Bitcoin heavily dominates the cryptocurrency markets, its use in micropayments is still a challenge due to long transaction confirmation times and high fees. Recently, the concept of off-chain transactions is introduced that led to the idea of establishing a payment channel network called Lightning Network (LN), which utilizes multi-hop payments. Off-chain links provide the ability to make instant payments without a need to writing to Blockchain. However, LN's design still favors fees, and it is creating hub nodes or relays that defeat the purpose of Blockchain. In addition, it is still not reliable, as not all transactions are guaranteed to be delivered to their destinations. These issues hinder its wide adoption by retailers. To address this issue, in this paper, we argue that the retailers could create a private payment channel network among them to serve their business needs, just like the concept of private Blockchains. The goal is to build a pure peer-to-peer topology that will prevent the formation of hub nodes while also eliminating the need for any relays to increase the robustness of the payments. Assuming off-chain links as edges and retailers as nodes, we formulate the problem as a multi-flow commodity problem where transactions represent the commodities from various sources to destinations. As the multi-flow commodity problem is NP-Complete, we propose a heuristic approach that utilizes Dijkstra's shortest path algorithm for payments in a dynamic way by updating the edge weights when new paths need to be found. The order of transactions is randomized to provide fairness among the retailers. We further extend this approach to guarantee the privacy of payments by forcing all the payments to travel at least three hops. We utilized k-shortest path algorithm to choose from k options that will meet our criterion. The evaluations indicate that the proposed heuristic comes close to an optimal solution while providing scalability and guaranteeing user privacy.

Анонимные оффчейн-транзакции без валидации с возможностью обнаружения повторной траты

Анонимные оффчейн-транзакции без валидации с возможностью обнаружения повторной траты

Improving Success Rate of Transactions in Crypto currency Payment Channel Networks

In the recent times, the interest in Blockchainbased crypto currencies has increased rapidly. But the slow time of confirmation of transaction and the high charges per transaction prove to be a problem in the adoption of this technology for micro-payments. To solve this scalability problem, the idea of establishing payment channel networks where nodes establish payment channels between each other to perform offchain transactions. However, this method results in a certain one-way capacity for both nodes for making transactions which means that if a node exceeds its capacity, the channel becomes useless in that direction and hence the payment fails which creates an imbalance in the network. In this paper we aim to increase the rate of success of payments by using the fact that each node is connected to multiple points in a network which can act as gateways and we can use any of these gateways to complete a transaction. By using the inbound and outbound payment traffic ratio, we also define a method for the selection of a particular gateway to carry out the transaction. We use split payment capability with this method to increase the rate of success furthermore, especially for larger transactions.

Money Laundering Through Bitcoin: The Emerging Implications of Technological Advancement.

Bitcoin, conceived by the pseudonymous software developer Satoshi Nakomoto, is the world’s first cryptocurrency. This invention of peer-to-peer electronic cash has trigerred a series of apprehension in the financial world. The fact that it has enabled alternative means of transacting to conventional banking has steered a new source of stress within the financial arena. Bitcoin, in terms of technology and currency, has been defined in many ways. Albeit Paul Vigna and Michael Casey describe it as borderless, pseudo-anonymous, decentralised, and outside of regulatory monetary systems, other researches also suggest that these attributes potentially give rise for criminals to evade law enforcement. The focal point of this paper is to provide an insight on the emergence of illicit financial crimes particularly through money laundering, caused by the increasing use of bitcoins. The research paper explicates on two very common ways for “bitcoin laundering” namely: either through bitcoin mixes or bitcoin exchanges or by using both methods. The risk of money laundering is facilitated by the anonymous feature of bitcoin especially when coupled with sophisticated money laundering services, also known as bitcoin mixing, provided on the Darknet. The second strategy of cashing-out dirty bitcoin through bitcoin exchanges unfolds the issue of regulated and unregulated bitcoin exchanges businesses. The other issue with bitcoin exchanges is that they have now turned to a new shadow banking system of doing off-chain transactions on behalf of their customers to outsiders without any regulations in place. The process of laundering money through bitcoin has become easier and accessible to a greater audience, especially when existing laws are not being applied appropriately. In this context, this paper is of the view that the European Union is the best platform to study cybercrimes, especially crimes related to bitcoin. This paper shall discuss the existing legal and regulatory frameworks provided by the European Union to curb cybercrimes but also, by illustrating the attempts (and the lack of attempts) made by the English and German governments to regulate risks of cybercrimes posed by cryptocurrency.

Evaluating Methods for the Identification of Off-Chain Transactions in the Lightning Network

Payment channels and off-chain transactions are used to address blockchain scalability. Those mechanisms rely on the blockchain proper, as the resolution mechanism. They allow for high transaction throughput due to the pure peer-to-peer nature of the transaction exchange that happens directly between the peers, without the involvement of the blockchain transactions. The transactions are not mediated through the blockchain but happen off-chain. The transactions in such overlay networks are not included in the blockchain, they nevertheless leave some data traces in a public ledger. We have used the Bitcoin mainnet and testnet blockchains together with the Lightning network node to explore what can be inferred from the underlying blockchain in the context of Lightning transactions, channel setup, and channel teardown. The main purpose of this study is to identify what methods, transaction signatures, and data can be used to understand the non-visible publicly off-chain transactions. We have proposed heuristics for identifying the setup and teardown transactions, quantified and analyzed the effectiveness of our proposed methods. Using the data from the Bitcoin blockchain, as well as the data from the Lightning network to link related information we have found when parsing the blockchain, we generate network graph representations showing the relationships between the Lightning network channels identified on the blockchain. This study is significant from the personal data and privacy perspectives, as well as from forensics. We have established that at least 75% of all P2WSH transactions are Lightning transactions, and some of the channels can be deduced from the blockchain analysis. The synthesized results demonstrate that our methods are viable for identifying a subset of transactions and that only partial topology of the payment channels can be obtained from the data left in the blockchain.

2nd Global Cryptoasset Benchmarking Study

This report reviews the impact of significant changes in the industry since the publication of the 2nd Global Cryptoasset Benchmarking Study in 2018. It provides novel insights into the state of the cryptoasset industry, having gathered data from 280 companies in 59 countries and across four main market segments – exchanges, payments, custody and mining. Highlights from the report - Full-time equivalent (FTE) employee growth slowed considerably following the late-2017 market frenzy. Respondents across all market segments, reported year-on-year growth of 21 per cent in 2019, down from 57 per cent in 2018. - The survey findings estimate that on average 39 per cent of proof-of-work mining is powered by renewable energy, primarily hydroelectric energy. Understanding the energy source of mining is important because electricity costs account for the majority of hashers’ operational expenditures – albeit with some variability across world regions – and hashers have long competed on accessing the cheapest energy source. - Aligned with 2018 findings, new survey data shows that off-chain transactions, both in terms of volumes and numbers, continue to be dominated by fiat-cryptoasset trades (and vice-versa), meaning that users primarily interact with service providers, such as exchanges, to enter and leave the cryptoasset ecosystem. - Stablecoins are becoming increasingly available. The share of service providers supporting Tether grew from four per cent to 32 per cent between 2018 and 2020, compared to 11 per cent to 55 per cent support growth for non-Tether stablecoins. This is aligned with the rising value of transactions denominated in stablecoins. - Service providers operationally headquartered in North America and Europe indicate that business and institutional clients make up 30 per cent of their customers. This figure is much lower for APAC and Latin American firms at 16 per cent and 10 per cent respectively. - The share of cryptoasset-only companies that did not conduct any KYC checks at all dropped from 48 per cent to 13 per cent between 2018 and 2020, most likely resulting from the progressive harmonisation of KYC/AML standards across jurisdictions, such as initiated by the Financial Action Task Force (FATF). The inclusion of firms exclusively supporting cryptoassets featured in FATF’s updated standards and recommendations is believed to have spurred greater compliance among this group of firms. However, this should not be interpreted as these companies becoming fully KYC compliant as some KYC checks are only applied to a subset of consumers.