Private and Atomic Exchange of Assets over Zero Knowledge Based Payment Ledger

TL;DR

This paper introduces a zero-knowledge based protocol for private, atomic, and fair exchange of crypto assets, extending privacy features and supporting multi-currency transactions directly on the blockchain.

Contribution

It proposes a novel zero-knowledge proof system and extended note format enabling privacy-preserving, atomic exchanges of multiple cryptocurrencies without relying on third-party escrow or off-chain solutions.

Findings

Supports privacy-enhanced, atomic asset exchanges on-chain

Extends zero-knowledge proofs for multi-asset transactions

Demonstrates feasibility with privacy-preserving exchange protocols

Abstract

Bitcoin brings a new type of digital currency that does not rely on a central system to maintain transactions. By benefiting from the concept of decentralized ledger, users who do not know or trust each other can still conduct transactions in a peer-to-peer manner. Inspired by Bitcoin, other cryptocurrencies were invented in recent years such as Ethereum, Dash, Zcash, Monero, Grin, etc. Some of these focus on enhancing privacy for instance crypto note or systems that apply the similar concept of encrypted notes used for transactions to enhance privacy (e.g., Zcash, Monero). However, there are few mechanisms to support the exchange of privacy-enhanced notes or assets on the chain, and at the same time preserving the privacy of the exchange operations. Existing approaches for fair exchanges of assets with privacy mostly rely on off-chain/side-chain, escrow or centralized services. Thus, we propose a solution that supports oblivious and privacy-protected fair exchange of crypto notes or privacy enhanced crypto assets. The technology is demonstrated by extending zero-knowledge based crypto notes. To address "privacy" and "multi-currency", we build a new zero-knowledge proving system and extend note format with new property to represent various types of tokenized assets or cryptocurrencies. By extending the payment protocol, exchange operations are realized through privacy enhanced transactions (e.g., shielded transactions). Based on the possible scenarios during the exchange operation, we add new constraints and conditions to the zero-knowledge proving system used for validating transactions publicly.