Fast, Favorable, and Fair Blockchain-based Exchange of Digital Goods using State Channels

Abstract

When exchanging data with an untrusted counterpart, there is a risk that the counterpart will not behave honestly. Fair exchange protocols provide fairness guarantees to involved parties, e.g., by employing blockchains as trusted third parties. However, blockchain transaction fees and block creation times render such protocols expensive and slow. Furthermore, grieving attacks impose the risk of significant unilateral costs. To improve on all three, we propose a state channel-based fair exchange protocol with a mechanism to prevent grieving attacks. Our protocol lowers the cost of repeating exchanges and increases performance while preserving security guarantees of state-of-the-art fair exchange protocols. Using the Ethereum blockchain and the Perun state channel framework, we evaluate our protocol with regard to cost and performance showing significant improvements in comparison to the state-of-the-art.