Periodic Reporting for period 1 - CRYPTOLAYER (Cryptography for Second Layer Blockchain Protocols)
Berichtszeitraum: 2023-03-01 bis 2025-08-31
Blockchain technologies distribute trust over a large number of parties, thereby offering a secure and trustworthy alternative to the prevailing centralized platforms. Unfortunately, due to their inherent distributed nature, state-of-the-art blockchains face major limitations in terms of scalability, confidentiality and functionality. Moreover, while the underlying blockchain infrastructure provides strong security guarantees, a range of prominent attacks has shown that applications built atop blockchains remain highly vulnerable. As a result, despite major advances, current blockchain technologies are still not ready to support large-scale applications.
The goal of CRYPTOLAYER is to address these shortcomings by building a network of second-layer protocols that rely on the blockchain solely for security. While second-layer solutions are already widely deployed, they often lack rigorous theoretical foundations, posing serious security risks. Additionally, they focus primarily on scalability, neglecting advanced features needed for diverse decentralized applications. The CRYPTOLAYER project will address these shortcomings by building solid foundations for second-layer protocols using the concepts of modern cryptography. We will propose novel protocols that enhance scalability, confidentiality and functionality. Moreover, since secure protocol design is highly involved and error-prone, we will build a formal framework for their rigorous security analysis. CRYPTOLAYER will thus contribute to the ongoing development of building trustworthy decentralized applications competitive with centralized platforms.
The goal of CRYPTOLAYER is to address these shortcomings by building a network of second-layer protocols that rely on the blockchain solely for security. While second-layer solutions are already widely deployed, they often lack rigorous theoretical foundations, posing serious security risks. Additionally, they focus primarily on scalability, neglecting advanced features needed for diverse decentralized applications. The CRYPTOLAYER project will address these shortcomings by building solid foundations for second-layer protocols using the concepts of modern cryptography. We will propose novel protocols that enhance scalability, confidentiality and functionality. Moreover, since secure protocol design is highly involved and error-prone, we will build a formal framework for their rigorous security analysis. CRYPTOLAYER will thus contribute to the ongoing development of building trustworthy decentralized applications competitive with centralized platforms.
In the CRYPTOLAYER project, we introduced a novel security model for analyzing second-layer protocols in settings where all parties may act malicious. At the core of this model is the concept of distributed adversaries, which captures the realistic assumption that parties may be corrupted by independent adversaries with conflicting interests. This closely reflects the adversarial environment in which blockchain applications operate, where the prospect of substantial financial gain makes the traditional cryptographic assumption of honest parties unlikely to hold.
A key contribution of our work is to design protocols that prevent collusion in settings where blockchains must handle confidential data. To this end, we developed a new secret sharing scheme called Secret Sharing with Snitching (SSS). Unlike traditional schemes, SSS ensures that any collusion among shareholders results in at least one party obtaining a snitching proof—a uniquely attributable proof of collusion. Such proofs create strong disincentives for collusion by enabling financial penalties for malicious behavior. A major technical challenge is defending against MPC-based collusion, where parties use secure multiparty computation (MPC) to mount sophisticated attacks.
We also present advances in encrypted mempools, aimed at ensuring censorship resistance in blockchain systems. We show how to extend and further strengthen the notion of threshold traitor tracing encryption to prevent collusion in threshold encryption. We introduce new schemes for (identity based) threshold encryption and show how to guarantee security against chosen ciphertext attacks (CCA). Further, we introduce a traitor tracing threshold encryption scheme that eliminates the need for a trusted dealer—enhancing decentralization, a core goal of blockchain systems. Finally, we present a new construction for batched threshold encryption (BTE). Our construction allows decrypting the transactions in a block with communication sub-linear in the block size, and in contrast to prior work avoids an expensive per-block setup.
A key contribution of our work is to design protocols that prevent collusion in settings where blockchains must handle confidential data. To this end, we developed a new secret sharing scheme called Secret Sharing with Snitching (SSS). Unlike traditional schemes, SSS ensures that any collusion among shareholders results in at least one party obtaining a snitching proof—a uniquely attributable proof of collusion. Such proofs create strong disincentives for collusion by enabling financial penalties for malicious behavior. A major technical challenge is defending against MPC-based collusion, where parties use secure multiparty computation (MPC) to mount sophisticated attacks.
We also present advances in encrypted mempools, aimed at ensuring censorship resistance in blockchain systems. We show how to extend and further strengthen the notion of threshold traitor tracing encryption to prevent collusion in threshold encryption. We introduce new schemes for (identity based) threshold encryption and show how to guarantee security against chosen ciphertext attacks (CCA). Further, we introduce a traitor tracing threshold encryption scheme that eliminates the need for a trusted dealer—enhancing decentralization, a core goal of blockchain systems. Finally, we present a new construction for batched threshold encryption (BTE). Our construction allows decrypting the transactions in a block with communication sub-linear in the block size, and in contrast to prior work avoids an expensive per-block setup.
CRYPTOLAYER has already made significant contributions to the security, scalability, and functionality of blockchains. We introduced new security models for the design and analysis of cryptographic second-layer protocols. In addition, our work on threshold encryption directly supports the development of encrypted mempools—an important step toward increasing the trustworthiness of blockchains.
Looking ahead, we will continue working towards achieving the main objectives of the CRYPTOLAYER projects by strengthening the mathematical foundations and enhancing the capabilities of second-layer protocols. A key focus will be on translating our theoretical results into practical solutions with real-world impact on the blockchain ecosystem.
Looking ahead, we will continue working towards achieving the main objectives of the CRYPTOLAYER projects by strengthening the mathematical foundations and enhancing the capabilities of second-layer protocols. A key focus will be on translating our theoretical results into practical solutions with real-world impact on the blockchain ecosystem.