Perun: Virtual Payment Hubs over Cryptocurrencies

Payment channels emerged recently as an efficient method for performing cheap micropayments in cryptocurrencies. In contrast to traditional on-chain transactions, payment channels have the advantage that they allow for nearly unlimited number of transactions between parties without involving the blockchain. In this work, we introduce Perun, an off-chain channel system that offers a new method for connecting channels that is more efficient than the existing technique of "routing transactions" over multiple channels. To this end, Perun introduces a technique called "virtual payment channels" that avoids involvement of the intermediary for each individual payment. In this paper we formally model and prove security of this technique in the case of one intermediary, who can be viewed as a "payment hub" that has direct channels with several parties. Our scheme works over any cryptocurrency that provides Turing-complete smart contracts. As a proof of concept, we implemented Perun's smart contracts in Ethereum.