Secure, fast and practical: ETH wants to simplify crypto payments

Digital currencies have long become mainstream and an established alternative for investment strategy. The two largest players, Bitcoin and Ethereum, together account for over 140 billion euros of crypto money in circulation. The next step, and it's it progress, is finding a way to use cryptocurrencies to pay for everyday purchases. Today, for example, it can take almost an hour for a Bitcoin payment to be approved. Ether, which was developed as a full-​value substitute for conventional money from the outset, allows users to complete a payment process in three minutes. However, no one wants to wait three minutes at the Migros cash register or in the online shop for a transaction to process. Therefore, a team at ETH Zurich has created «Snappy» – a system that's supposed to speed up transactions with Ether.

Why crypto payments take so long

As Srdjan Capkun, Professor of Information Security at ETH Zurich, explains, the reason for this is the nature of the blockchains on which the cryptocurrencies are based. A blockchain consists of information that’s stored on a shared data register. There’s no centralised server for the data. Instead, it’s continuously synchronised on thousands of participating servers. This is why it takes a very long time before a transaction is communicated and then confirmed.

The advantage of this? One of the great strengths of cryptocurrencies is that the data is transparent and secure. Because the information is stored on so many servers at the same time, it is visible to all members of the network. This makes it impossible to manipulate the information and means that the same automated rules apply to everyone and institutes such as banks, credit card companies or governments can’t influence it.

Digital deposit system in the background

Many attempts have been made to accelerate transactions with cryptocurrencies, but these involved removing the payment process from the blockchain. Although this worked perfectly by synchronising with the network beforehand and afterwards, security, transparency and freedom from authority were lost. Together with a colleague from University College London, Capkun designed a simple digital deposit system that runs in the background to the payment process. When they pay, customers place a deposit of the same value – but only for as long as it takes to confirm the payment. That’s an hour for Bitcoin and three minutes for Ether.

Since «Snappy» is based on Ether, the three-minute deposit doesn’t show in the user’s own virtual wallet. The recipient of the payment, however, can confirm payment immediately without running the risk of losing the sum. After all, it’s only after the three minutes have expired that the seller sees if the purchase price has been covered. This is where the deposit comes in. If there’s something suspicious about the payment, the seller can retrieve the deposit instead. And as nothing can be manipulated within blockchain, the seller doesn’t need to make a special claim – if something is amiss, it automatically shows in the blockchain and is plain for everyone to see.

Safety for both sides

In addition to customers, «Snappy» requires sellers to make a deposit, too. For a small vendor, such as a kiosk, the deposit is low. For a large vendor, it is commensurately higher. «The deposits they pay are equal to the sum of all the individual sellers’ transactions that take place in the same timeframe,» Capkun states. This also protects the customer against malicious behaviour. All payments are secured and can also be processed quickly thanks to the deposits. A further advantage is that customers and sellers don’t notice the deposit security system running in the background. With «Snappy», everything is automated thanks to what are known as smart contracts – computer protocols that represent digital contracts. They define processes and rules that everyone in the blockchain automatically complies with.

The algorithms and protocols «Snappy» is base don can simply be deployed on the Ethereum blockchain. That’s the theory. The system is not yet being used in practice. Capkun and his team envisage «Snappy» becoming a feature of smartphone apps. In shops or restaurants, for example, a connection to the seller’s account could be established via a QR code. The payment process itself would be just as fast and straightforward as with a conventional payment app.

«Snappy» is just the beginning

In his working group, security expert Capkun is participating in a number of other projects on blockchain security and privacy. He is also conducting research into trusted hardware. This involves developing computers and devices based on technology that is completely secure, impossible to manipulate and therefore completely trustworthy. The idea is that people don’t have to place their trust in a third party or the manufacturer.

The security expert chose this subject area because the tasks are intellectually challenging. As he claims, he’s not interested in the anarchist approaches that both blockchain and trusted hardware inevitably entail. They are alternatives to the currently dominant authorities: governments, banks or economic giants. Capkun owns Bitcoin and Ether himself. As he says, what he finds exciting is the technologies behind it and the independence.

Interesting, but how secure is «secure»?

Should «Snappy» be launched, it could be a valid alternative for crypto critics and sceptics, too. The slow payment process is also something that's annoyed many people who have a positive attitude towards crypt currencies, but are missing a way to use them in everyday life. «Snappy» could change this. The idea makes sense, especially if you're not dealing with too large amounts of money. After all, if a company has a turnover of several million, it will always need double the amount to cover the deposit. This could become a problem for some providers, even if large companies have more money available.

The trusted hardware project Capkun is working on is a controversial topic. Many wonder if it's a utopian idea that there can be a completely secure communication systems in these days, which allows fast and easy handling. But, who knows, maybe Capkun will soon prove all critics wrong. If you’d like to know what’s going to happen with «Snappy», trusted hardware and similar projects and are keen to stay up to date with the latest cryptocurrency news, follow me by clicking the «Follow author» button on my profile.