Privacy preserving outsourcing of state channel arbitration in microraiden

Decentralized blockchain-based cryptocurrencies like Ethereum and Bitcoin offer a new way to hold and transact money. However, storage requirements for every node and difficulty in transaction confirmation make them difficult to match traditional payment processors. A proposed solution to scalability is the use of payment channels that allow mutually distrustful parties to create and authorize payments between one another off-line. Not only does this allow payments to be processed quickly, but it also reduces transaction volume in the underlying blockchain. An unsolved problem with off-chain payment channels is that participants in the channel must be on-line and alert to channel events all the time. If any participant in the channel goes offline for any reason (power outage, process crashes, cost too high) that party stands to lose money if other parties attempt to reverse payments. In an ideal world, a solution would involve a third party that can process payments on behalf of each party, but it requires trust establishment. In this work, we present a protocol that solves the monitoring problem called Pisa. Pisa allows channel participants to appoint distrusted third parties to watch their channel and handle finalization on their behalf without revealing any linkable state information. We also propose a fair exchange protocol that ensures that payment for appointment of a third party guarantees a penalty if the third party cheats. Further, we implement Pisa on top of an existing Ethereum payment channel framework, µ-Raiden, and we demonstrate its additional overhead to channel operation