Paper 2022/640

Dialektos: Privacy-preserving Smart Contracts

Tadas Vaitiekūnas

Abstract

Digital ledger technologies supporting smart contracts usually does not ensure any privacy for user transactions or state. Most solutions to this problem either use private network setups, centralized parties, hardware enclaves, or cryptographic primitives, which are novel, complex, and computationally expensive. This paper looks into an alternative way of implementing smart contracts. Our construction of a protocol for smart contracts employs an overlay protocol design pattern for decentralized applications, which separates transaction ordering from transaction validation. This enables consensus on application state while revealing only encrypted versions of transactions to public consensus protocol network. UTXO-based smart contract model allows partitioning state of distributed ledger in a way that participants would need to decrypt and reach consensus only on those transactions, which are relevant to them. We present security analysis, which shows that, assuming presence of a secure consensus protocol, our construction achieves consensus on UTXO-based transactions, while hiding most of transaction details from all protocol parties, except a limited subset of parties, which need particular transactions for construction of their state.