Bocek, Thomas

Rafati, Sina

Rodrigues, Bruno

Stiller, Burkhard

ZORA

Zurich Open Repository andArchiveUniversity of ZurichMain LibraryStrickhofstrasse 39CH-8057 Zurichwww.zora.uzh.chYear: 2017CoinBlesk - a real-time, bitcoin-based payment approach and appBocek, Thomas; Rafati, Sina; Rodrigues, Bruno; Stiller, BurkhardPosted at the Zurich Open Repository and Archive, University of ZurichZORA URL: https://doi.org/10.5167/uzh-145292Published Version  Originally published at:Bocek, Thomas; Rafati, Sina; Rodrigues, Bruno; Stiller, Burkhard (2017). CoinBlesk - a real-time,bitcoin-based payment approach and app. ERCIM News, 1(110):14-15.ERCIM NEWS 110   July 201714Special Theme: Blockchain EngineeringGenerally, blockchains pave the pathtowards secure data storage in a decen-tralised manner. They are applicable to awide range of application domains, suchas financial technologies, public reg-istries, and Internet-of-Things (IoT) [1].As one of the most prominent blockchainexamples, Bitcoin has attained largepublic and research interest, since itoffers the first solution for a secure andfully decentralised crypto-currency.Thus, the Communication SystemsGroup (CSG) of the University of Zürichdecided to focus research work on (a)real-time payments with Bitcoins [2, 3],which was trialled at the UZH Mensa[L1] and presented at public fairs [L2],(b) the use of blockchains within IoT,especially the supply chain in the phar-maceutical industry which is highly reg-ulated, and (c) blockchain-based coun-termeasures for Distributed Denial-of-Service (DDoS) attacks by utilisingSmart Contracts (SC). Blockchain technology has become pop-ular for multiple use-cases, such as IoT,crypto-currency, and security, becauseblockchains are inherently backed bySmart Contracts. They are defined asformalised protocols to facilitate, verify,or enforce the negotiation or perform-ance of a contract. In this sense, Bitcoin,considered as the pioneer implementa-tion of blockchains, and especially theBitcoin Script, serve as the first SC forthis crypto-currency. Besides theoret-ical work, the trial deployment ofblockchains and their application-spe-cific combination with SCs delivervaluable insights for distributed sys-tems’ operations. Specific blockchainbenefits include a fully decentralisedsystem operation, transaction trans-parency, immutability, and securitycombined with selected areas of legallybinding interactions.In this context the new Coinbleskapproach [2, 3, L1, L2] belongs to theuse-cases of crypto-currencies. It is aninstant payment wallet with Bitcoinsand minimal trust with the strategic goalto generalise and optimise its paymentprotocol to support other crypto-curren-cies, while maintaining security, pri-vacy, and convenience as key. TheCoinBlesk app for Android includes aBitcoin payment server, where the sellerand the buyer are able to handle Bitcoinpayments. This safe and fast mobile pay-ment method is contactless, using NearField Communications (NFC) tech-nology, without the need for swiping,signing, or PIN. To reach a transactiondelay below one second, a multisig(multi signature) mechanism wasdesigned such that the Coinblesk servercannot transfer funds without the signa-ture of the client. Since sending everytransaction immediately to theblockchain reveals the current limita-tions of Bitcoins, and the current fee ofan average transaction is more than US$2, these transactions are batched andtransaction fees are reduced by per-forming the clearing operation at theserver, where the user can specify anamount stipulating when clearing shouldbe made. Only once that amount isreached, is a transaction sent to theBitcoin blockchain. Thus, if a transac-tion is cleared on the server (not yet sentto the Bitcoin blockchain) a virtual bal-ance is maintained in order to acknowl-edge the payment within this one secondlimit. This mechanism reduces the number oftransactions – termed “batching transac-tions” – sent to the Bitcoin blockchainand, thus, lowers the average transactionfees of these transactions. The systemhas been built in such a way that the userCoinblesk – A Real-time, Bitcoin-basedPayment Approach and Appby Thomas Bocek, Sina Rafati, Bruno Rodrigues and Burkhard Stiller (University of Zürich)The Communication Systems Group (CSG) of the University of Zürich has been exploring the useof blockchains in several application areas. The work concluded that for practical use, Bitcointransactions should be gathered in a batch.Figure1:Coinblesk’srefundtransactiontime-line.ERCIM NEWS 110   July 2017 15Over eight years have gone by sinceBitcoin’s deployment, and it is stillgoing strong. While there are manyexplanations for its success, the innova-tive backbone structure – the blockchain-– which has inspired so many alterna-tive systems, undoubtedly plays aleading role in this story. Blockchains store the state of the trans-actions in the system. Users compete toform new blocks, which confirm bothnew and all existing transactions in theprevious blocks. Those who createblocks first are rewarded with cash inthe system. Despite the blockchain innovation,there are some fundamental problemsthat lie in its design, which stem fromthe blockchain itself, and affect all sim-ilar systems. Two major problems which are inherentto almost all blockchain models are: Bitcoin Unchainedby Christopher Carr, Colin Boyd (NTNU), Xavier Boyen and Thomas Haines (QUT)Bitcoin’s distributed ledger is an innovative way of solving the double spending problem in adecentralised system. However, it causes incompressible transaction delays and incentivisesconsolidation of mining power. We ask, is it possible to eliminate these problems withoutlosing the decentralised principles that Bitcoin was built on?  can set that maximum amount, sinceonly the user can determine the trustlevel to be reached. In turn, the systemhas to broadcast these batched transac-tions to the Bitcoin blockchain, e.g., ifthe user sets the limit at €100 and if thevirtual balance reaches this value, allaccumulated transactions are broadcast.This approach was chosen over theLightning network’s approach [L4],since its technical complexity is lowerand more importantly it also works withtransaction malleability. The currentCoinblesk design can be optimised fur-ther, once transaction malleability issolved in the Bitcoin network or anyanother crypto-currency, such asLitecoin, which does not suffer frommalleability, is used. However, as men-tioned above, the Coinblesk app doesnot follow the fully trustless approach insuch cases, since the Coinblesk serverrequires this minimal trust up to theamount specified by the user. All funds deposited in Coinblesk areheld at a 2-of-2 multisig address, whichmeans that even if the operator of theCoinblesk server is intentionally mali-cious, he will never be able to steal auser’s funds. In the case of a Coinbleskserver hacking and private keys beingstolen, the hacking could only be suc-cessful if hackers were able to gainaccess to the user’s private keys as wellin order to steal bitcoins. Also, if theCoinblesk server disappears, clients areno longer able to spend their bitcoins.This is a major problem, because Swisslaw requires customers of a paymentservice to be able to gain full access totheir funds in any situation, and espe-cially if the operator of a paymentsystem should become bankrupt – or inthe case of the Coinblesk service, itmight be hacked. Additionally, allCoinblesk clients need to trust that thesystem will not disappear.Thus, the effective solution to thisproblem is a “refund transaction” astime-lined in Figure 1. A refund transac-tion is a pre-signed, time-locked trans-action, which sends all client funds toan address, exclusively controlled bythat client. Therefore, a refund transac-tion is automatically created by theCoinblesk app as soon as a new unspentoutput appears in the wallet – in partic-ular, whenever bitcoins are received or atransaction is created. The app takes allthe unspent outputs and creates a singletransaction sending all bitcoins to anaddress of a private key that is derivedfrom the client’s private seed. The clientsigns this transaction and returns it tothe server. The server checks that thetransaction is in fact time-locked, signsit, and returns the transaction fullysigned back to the client. Now, theclient is in possession of a valid, fullysigned refund transaction that becomesvalid as soon as the time-lock expires.Thus, in case the Coinblesk server sud-denly disappears, a client can broadcastthe refund transaction and regain con-trol over all their bitcoins.In conclusion, the experience with theCoinblesk design and implementationas well as experience from other appli-cations, such as the pharmaceuticalsupply chain [L3, L5], provides usefulinformation about scalability, energyefficiency, ease-of-use, and someinsights into customer acceptance.These results should be widely appli-cable in the blockchain world.Links:[L1] http://www.csg.uzh.ch/csg/en/news/Bitcoins.html[L2] http://www.csg.uzh.ch/csg/en/news/ coinbleskatCeBIT.html[L3] http://www.csg.uzh.ch/csg/en/news/kickstart-accelerator.html[L4] https://lightning.network/lightning-network-paper.pdf[L5] https://modum.io/References:[1] T. Bocek, B. Stiller: “SmartContracts – Blockchains in theWings”, in: C. Linnhoff-Popien, R.Schneider, M. Zaddach (Edts.):“Digital Marketplaces Unleashed”,Springer, 2017.[2] A. D. Carli: “ProtocolImprovements in CoinBlesk – AMobile Bitcoin Instant PaymentSolution”, Master Thesis, Univ.Zürich, Department of Informatics,Communication Systems Group,Zürich, Switzerland, April 2016.[3] R. Voellmy: “CoinBlesk, a MobileNFC Bitcoin Payment System”,Bachelor Thesis, Univ.Zürich,Communication Systems Group,Department of Informatics, Zürich,Switzerland, August 2015.Please contact: Thomas Bocek, Sina Rafati, BrunoRodrigues, Burkhard StillerUniversity of Zürich, Switzerland[bocek¦rafati¦rodrigues¦stiller]@ifi.uzh.ch

CoinBlesk - a real-time, bitcoin-based payment approach and app

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CoinBlesk - a real-time, bitcoin-based payment approach and app

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