Fpswap: Fair and Privacy Friendly Swap of Digital Assets on Blockchain

Abstract

Recently, cryptocurrencies have been introduced to enhance the privacy provided by Bitcoin. For example, CryptoNote, which implements the “Traceable Ring Signature” approach to achieve Untraceability, and Zcash seek to hide the content of a crypto note to enhance privacy while allowing the public to verify the validity of a payment transaction. However, all these schemes consider one-way transaction, and there are few mechanisms to support the two-way exchange of privacy-preserving notes or digital assets on the chain and simultaneously protect the privacy of the exchange operation. Existing approaches for fair exchange of assets with privacy mostly rely on off-chain or sidechain exchanges, escrow, or centralized services. Instead, in this paper, we propose a solution that supports the oblivious and private, fully on-chain fair exchange of crypto notes or confidential digital assets. We demonstrate this technology by extending zero-knowledge-based crypto notes. To address privacy and multiasset support, we built a new zero-knowledge proof system and extended the crypto note format with a new property to represent various types of digital or “tokenized” assets. We extend the payment protocol to implement fair exchange operations through the orchestration of privacy-enhanced asset transfer and payment transactions.