Card Payment Protocol for Cryptocurrencies with Payment Channel Network

Abstract

Cryptocurrency, despite the upsurge as a speculative investment, is still a long way from being people’s money. The extreme technicality poses a significant barrier for the general public to adopt it as a medium of exchange. Therefore, simplifying the payment process is a predominant necessity; for example, facilitation in adopting conventional payment instruments can bring convenience to both merchants and consumers. This article proposes a novel cryptocurrency card payment protocol leveraging the Payment Channel Network (PCN) concept, facilitating high throughput and affordable transactions. Our design is based on the Bitcoin-backed Lightning Network (LN) with adjustments to make it executable by a smart card. It also preserves the decentralized nature of cryptocurrencies, reduces operational costs in several ways, and allows instant settlement for the recipients as compared to both conventional and cryptocurrency card payment systems. Our game theoretical analysis, where we model the engagement between the cardholder and the card agent as a long-run extensive form game, attests that they accord with the protocol without experiencing any honest loss under pragmatic conditions. We also discuss the privacy features compared to conventional card payments and LN. The protocol can function independently, without the need for trust, and can also be regulated for those seeking government mediation. This approach can potentially revolutionize the payment landscape by allowing the public to use cryptocurrency for everyday transactions conveniently and allowing existing cryptocurrency holders to conduct affordable micropayments.