Paper 2022/1295

Daric: A Storage Efficient Payment Channel With Penalization Mechanism

Arash Mirzaei, Monash University
Amin Sakzad, Monash University
Jiangshan Yu, Monash University
Ron Steinfeld, Monash University

Lightning Network (LN), the most widely deployed payment channel for Bitcoin, requires channel parties to generate and store distinct revocation keys for all n payments of a channel to resolve fraudulent channel closures. To reduce the required storage in a payment channel, eltoo introduces a new signature type for Bitcoin to enable payment versioning. This allows a channel party to revoke all old payments by using a payment with a higher version number, reducing the storage complexity from O(n) to O(1). However, eltoo fails to achieve bounded closure, enabling a dishonest channel party to significantly delay the channel closure process. Eltoo also lacks a punishment mechanism, which may incentivize profit-driven channel parties to close a payment channel with an old state, to their own advantage. This paper introduces Daric, a payment channel with unlimited lifetime for Bitcoin that achieves optimal storage and bounded closure. Moreover, Daric implements a punishment mechanism and simultaneously avoids the methods other schemes commonly use to enable punishment: 1) state duplication which leads to exponential increase in the number of transactions with the number of applications on top of each other or 2) dedicated design of adaptor signatures which introduces compatibility issues with BLS or most post-quantum resistant digital signatures. We also formalise Daric and prove its security in the Universal Composability model.

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Publication info
Bitcoin scalability Payment channel Lightning Network Watchtower
Contact author(s)
arash mirzaei @ monash edu
amin sakzad @ monash edu
jiangshan yu @ monash edu
ron steinfeld @ monash edu
2022-10-01: revised
2022-09-29: received
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      author = {Arash Mirzaei and Amin Sakzad and Jiangshan Yu and Ron Steinfeld},
      title = {Daric: A Storage Efficient Payment Channel With Penalization Mechanism},
      howpublished = {Cryptology ePrint Archive, Paper 2022/1295},
      year = {2022},
      note = {\url{}},
      url = {}
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