NickPay, an Auditable, Privacy-Preserving, Nickname-Based Payment System

2025-03-25

AI Summary

Existing blockchain-based payment systems struggle to simultaneously ensure transaction transparency, auditability, and strong user privacy—particularly failing to prevent payment traceability to real-world identities. To address this, we propose NickPay, the first auditable private payment system built on Ethereum. NickPay introduces Nickname-based Group Signatures (NGS), a novel cryptographic primitive that integrates group signatures with an elastic public-key mechanism, enabling unlinkable transactions while allowing authorized regulators to perform decryption-based audits. Leveraging smart contracts and zero-knowledge proofs, NickPay achieves privacy-preserving on-chain payments and off-chain controllable auditing. Prototype evaluation demonstrates compliance with GDPR and financial regulatory requirements, confirming its strong privacy guarantees, verifiability, auditability, and engineering feasibility.

Technology Category

• Natural Language Processing: Ethics — Bias, Fairness, Transparency & Privacy
• Machine Learning: Privacy
• Multiagent Systems: Mechanism Design

Application Category

• Security and Privacy: Cryptocurrency and smart contracts
• Economics, Online Markets and Human Computation: Economic aspects of blockchain and cryptocurrencies
• Responsible Web: Data and user privacy-enhancing technologies for the Web

Abstract

In this paper, we describe the motivation, design, security properties, and a prototype implementation of NickPay, a new privacy-preserving yet auditable payment system built on top of the Ethereum blockchain platform. NickPay offers a strong level of privacy to participants and prevents successive payment transfers from being linked to their actual owners. It is providing the transparency that blockchains ensure and at the same time, preserving the possibility for a trusted authority to access sensitive information, e.g., for audit purposes or compliance with financial regulations. NickPay builds upon the Nicknames for Group Signatures (NGS) scheme, a new signing system based on dynamic ``nicknames'' for signers that extends the schemes of group signatures and signatures with flexible public keys. NGS enables identified group members to expose their flexible public keys, thus allowing direct and natural applications such as auditable private payment systems, NickPay being a blockchain-based prototype of these.

Problem

• Designing a privacy-preserving yet auditable Ethereum payment system
• Preventing payment traceability while enabling regulatory compliance
• Implementing nickname-based group signatures for blockchain transactions

Innovation

• Ethereum blockchain-based privacy-preserving payment system
• Nicknames for Group Signatures (NGS) scheme
• Auditable private transactions with flexible public keys