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Title:
AUPCH: Auditable Unlinkable Payment Channel Hubs
Authors: Pedro Moreno-Sanchez, Mohsen Minaei, Srinivasan Raghuraman, Panagiotis Chatzigiannis, Duc V. Le
Abstract:Cryptocurrencies, which have gained significant adoption in
recent years, face ongoing challenges in scalability and privacy. Payment
Channel Hubs (PCHs) constitute a solution to both issues by shifting
transactions off the public ledger. Various PCH constructions have been
proposed, offering different degrees of unlinkability, efficiency, and inter-
operability. However, regulatory compliance remains a significant con-
cern, particularly under emerging frameworks like the EU’s Markets in
Crypto-Assets (MiCA) regulation and FATF Travel Rule requirements.
This work addresses a gap in existing PCH constructions: the lack of
regulatory-compliant auditability mechanisms. While concurrent work
AuditPCH attempts to address this challenge, it suffers from fundamen-
tal limitations, including reliance on channel closures for auditing, vul-
nerability to unilateral de-anonymization by the hub, and lack of formal
security guarantees for the auditing process. Our approach fundamen-
tally differs by providing targeted, non-disruptive auditability that al-
lows auditability for high-risk payments while preserving unlinkability
for the rest. To achieve this, we present Verifiable Linkable Randomiz-
able Puzzles (VLRP), a new cryptographic primitive that enables a party
to commit to a secret using two distinct keys: a verifiability key (VK)
and an auditability key (AK). This primitive provides (i) verifiability
that the owner of the VK issued the commitment, (ii) the ability to ran-
domize the commitment to ensure unlinkability, even for the owner of the
VK, while still allowing traceability using the AK, and (iii) collaborative
auditing that prevents unilateral de-anonymization.
We then present Auditable Unlinkable Payment Channel Hubs, AUPCH,
a PCH built on VLRP that offers auditability guarantees with stronger se-
curity guarantees than existing approaches. AUPCH provides modular
integration with existing PCH frameworks (A2L, BlindHub), operates
without requiring channel closures, and ensures that auditing requires
collaboration between hub and auditing agent, preventing abuse by ei-
ther party alone. Crucially, our approach acts as a wrapper around exist-
ing PCH implementations, requiring only replacing randomizable puzzle
calls with VLRP calls, a minimal change that dramatically reduces de-
ployment complexity compared to building new systems from scratch.
ePrint: https://eprint.iacr.org/2025/1524
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