A Sample Model for Integrating Decentralized Payment Systems

Through Common Gateway for E-commerce

VADIMS ZILNIEKS, INGARS ERINS

Faculty of Computer Science and Information Technology

Riga Technical University

10 Zunda Embankment, Riga, LV-1048

LATVIA

processing but also introduces new challenges that need to be addressed.

Key-Words: - distributed ledger, blockchain, finality, e-commerce, refund, cross-chain bridge

Received: March 14, 2023. Revised: September 4, 2023. Accepted: September 14, 2023. Published: September 22, 2023.

Modern payment systems are relocating to a more

abstract level from the perspective of end-users.

Users pay by mobile banking applications or near-

payment platforms. They are often required to

participate in a significant number of them,

depending on the target groups. Additionally,

integrations with internal software can be a crucial

concern. That is why payment institutions are very

interested in initiatives like Open Banking, [1].

identify channels for receiving incoming payments

and processing outgoing payments, e.g. fund

decentralized finances (DeFi), [2], with numerous

solutions and high market capitalization as well.

While DeFi is not well-regulated, it is developing at

some data from the blockchain using smart

contracts:

• Using off-chain data with state channels or

payment channels. Refers to a technique of

removing part of transactions from a blockchain

transfers between separate blockchains. By

transferring funds to an alternative platform,

transaction fees can be potentially reduced.

the underlying Layer 1 (L1). Transactions are

anchored to L1, and any malicious actions can be

investigated even if the side-chain is closed. There

are two main methods of L1 and L2 connection:

optimistic, [6], and zero-knowledge, [7]. The

optimistic approach involves considering an

correctness of an operation. ZK solutions are

currently in an active area of research, [7], [8].

Network’s, [9], popularity in the 2010s. Some argue,

[10], [11], [12], that the main idea behind Lightning

was not fully achieved. Only large investors and

well-managed Bitcoin node groups can hold direct

payment channels and utilize them for e-commerce

and trade-off security issues.

merchant, which features an elastic mechanism for

interaction with external payment platforms

depending on risk considerations.

automatic service (Figure 1), where customers can

purchase goods by scanning a QR code. On

scanning, the application adds an item to a virtual

shopping cart. After the customers have added the

desired goods to the shopping cart, they proceed to

• effective processing of transactions for fast

purchases and fast payouts.

Since 2018, the European Union has implemented

an updated version of the single gateway concept

for third-party providers (TPP) to control banking

a high level of compatibility with the target model

of the research.

the occurrence of hard forks, which often arise as a

result of protocol or blockchain changes within a

blockchain. A possible solution here is proxy

contracts, [25].

another as an e-commerce purchase are enumerated

in Figure 3. The external platform in the context

refers to the DLT platform used by the purchaser,

while the internal refers to the DLT platform of the

merchant.

1. Using a mobile application (MA) Transaction

eTx_CustomerToMerchant for the amount

3. eB_Y header is linked to

eTx_CustomerToMerchant in the MA to track it;

4. eAmount_X is locked in eDLT;

5. Relayer automatically copies eB_Y to

iSmrtCnt_eClient;

6. iSmrtCnt_eClient verifies eB_Y and stores it;

7. the MA updates the transaction state of

eTx_CustomerToMerchant by checking

iSmrtCnt_eClient for eB_Y header;

8. The user through MA (or Oracle node) sends a

transaction iTx_SendToMerchant;

10. iTx_SendToMerchant is proposed to the

internal blockchain iDLT;

11. iTx_UnlockForMerchant is included in the

internal block;

12. Merchants can be notified about successful

purchases in the back office application.

2. iTx_MerchantToMainAccount is included in the

internal block iB_Y (committed);

3. Tokens of amount iAmount_X are burned in

iSmrtCntr_Burner;

4. Relayer automatically copies block iB_Y to

eDLT;

eSmrtCnt_iClient and unlocks amount of

eAmount_X* = iAmount_X to eDLT in a new

transaction eTx_SendToMainAccount;

7. eTx_SendToMainAccount is proposed in eDLT;

8. eTx_SendToMainAccount is included in an

eDLT block (committed).

bridge platform used, but the main principles remain

consistent.

making is delegated to a group of validators or

stalkers, [29].

chain finality will be:

(mint),

eventual finality, for strong finality equals 1,

optimal frequency for block synchronization. The

frequency is constrained by the time it takes for

finality to be achieved on both platforms, as well as

the fees associated with executing transactions. If

these fees are high relative to the purchase value, it

is necessary to find a balance between the minimum

frequency needed for block validation and an

acceptable waiting time for the transfer. Some DLT

platforms require validation of every block like

Ethereum, [29], while others like NEAR only

being an exception as using the proof-of-history

consensus, [31]. A quick analysis of the data shows

variation in the time to finality compared to the

block generation time.

refunded after a customer has left the store due to

product return, or in a case of timeout for faster

platforms or later disputes. Then a refund

mechanism can be activated to ensure customer

satisfaction with the service (See Section. 6).

on the relayer that bridges two platforms. Since the

relayer resends cryptographic secrets of locked

tokens, it theoretically can access and potentially

steal them. Therefore, the level of trust placed in the

relayer is critical for the transaction process.

• Fraud detectors can identify any mistakes or

malicious behavior in the connected platforms.

In the event of proven fraudulent activity,

insurance of operations.

bonuses for discovering malicious actions. The first

challenge is that there is no guarantee for fraud

detectors to be online. The second one for a given

scheme is that the target network is private, and

detectors must be able to verify transactions as

participants of a closed group without the benefit of

fee concurrency, as seen in public DL networks.

Fraud detectors perform their role for financial gain.

the model:

• automatic refund triggered by the system when

a purchase exceeds a predetermined timeout;

• automatic refund on technical issue;

• refund by a request, performed manually.

1. Purchase transaction goes to address of

SmrtCnt_Storage;

2. After being added to the block, the transaction

is added to SmrtCnt_Storage memory by

SmrtCnt_Storage with the identifier of the

original transaction to ensure its inclusion and

finalization;

5. If the transaction is found, then

SmrtCnt_Storage produces reversal operation;

If not found, then there can be additional logic

for saving this identifier for cases the

transaction is not committed yet and will be

found.

introducing insurance for operations. While

insurance may increase centralization within, it is

not an objective of the proposed model.

designing new e-commerce systems with bridge

technology. The provided schema is limited by the

this context, akin to the impact of PSD2, which

facilitated streamlined integrations between

financial institutions and service providers. The

presence of standardized protocols in DLT solutions,

particularly in their intercommunication, could give

comparable advantages, analogous to those

observed in the domain of Open Banking.

concept of private blockchain with a bridge to

external DLT platforms hold great promise for the

efficient e-commerce transactions.

[1] European Parliament. Consolidated text:

Directive (eu) 2015/2366 of the european

parliament and of the council of 25 november

2015 on payment services in the internal

market, amending directives 2002/65/ec,

2009/110/ec and 2013/36/eu and regulation

electronic cash system. 2009.

[4] Gavin Wood. Ethereum: a secure

decentralised generalised transaction ledger.

Ethereum Project Yellow Paper, p.1–32, 2014.

[5] Giuseppe Antonio Pierro and Henrique Rocha.

The influence factors on ethereum transaction

fees. pages 24–31. Institute of Electrical and

Electronics Engineers Inc., 5 2019.

2023. Available online:

https://ethereum.org/en/developers/docs/scalin

g/optimistic-rollups/

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blockchains. Mathematics, 9, 12 2021.

lightning network: Scalable off-chain instant

payments, 2016.

Mass exit attacks on the lightning network. 8

2022. Available online:

http://arxiv.org/abs/2208.01908

Timedilation attacks on the lightning network.

lightning-doesnt-work

impact of blockchain on e-commerce: A

framework for salient research topics.

Electronic Commerce Research and

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through blockchain (dlts): The regulatory

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