13.14. Design Doc 013: Customer-to-Customer Payments

13.14.1. Summary

This design document proposes an extension of the Taler protocol that allows payments from customer-to-customer without a merchant.

13.14.2. Motivation

To be usable as an electronic payment system with cash-like properties, customers should be able to transfer money between themselves without needing to setup anything beyond their wallet(s).

13.14.3. Requirements

  • The control data for customer-to-customer payments should be small enough to fit into a QR code or short message. No other direct communication channel between payer and payee should be required.
  • This customer-to-customer payment must be possible without trusting the other party beyond the point where the money has been received by the payee. Thus, sharing of coin private keys is not sufficient, we need transactional semantics resulting in exclusive control over the funds by the recipient.
  • The P2P payment protocol must not allow users to circumvent income transparency. That is, each P2P transaction must be visible on a KYCed transaction ledger (such as a bank account).
  • The money received via a P2P payment must be usable for further Taler payments with minimal delay.

13.14.4. New Terminology

  • An account is a non-expiring reserve for which entity knowing the reserve private key has completed a KYC procedure sufficient to enable receiving income under that address.
  • A pouch is a public-private key pair where the public key is an exchange address from which any owners of an account can pick up an amount left at a pouch assuming they know the pouches private key.
  • A wad is an exchange-to-exchange wire transfer that wires money into a group of accounts at the target exchange.

13.14.5. Proposed Solution

A complete solution for customer-to-customer payments consists of three possible operational flows.

Account creation and withdrawal

  1. The payee generates an account key, which also yields a payto://taler/$EXCHANGE_BASE_URL/$ACCOUNT_PUB target address (for which the payee knows the corresponding account private key).
  2. When withdrawing from an account, the exchange first checks if the customer has satisfied the KYC requirements. If not, the consumer is redirected to a Web page where they can perform the necessary KYC operation.
  3. For this, the exchange wire gateway is extended with a request to check the KYC status of a customer based on an ACCOUNT_PUB. Possible replies are in-progress and succeeded. An in-progress status should be accompanied with information how the customer may complete the KYC check.
  4. A new exchange endpoint /account/$ACCOUNT_PUB/kyc allows wallets to request a KYC for an ACCOUNT_PUB. Such a request may include the requirement to pay a KYC fee. The KYC fee may be charged to that account (if it exists), or could be waved if the account was established via a wire transfer from a partner bank.
  5. If the account owner fails to perform the KYC check, the funds in an account remain inaccessible. After a configurable duration, the funds may be considered forfeit and become the property of the exchange where the account is located.
  6. When requesting an account’s history (which can get quite long), the exchange only returns the last 3 months of data. Requesting the full history requires paying an account history fee (which is not done via a 402, but simply charged to the account when requested; full account histories for accounts with an insufficient balance cannot be requested – except of course the wallet could simply top up the account balance first, see below).
  7. If the exchange has received a deposit or merge into an account, or received an inbound wire transfer from a wad matching the account (see below), it adds the respective amount(s) to the account’s balance, allowing the KYC’ed customer to withdraw the funds.
  8. The account history endpoint should also allow long-polling. Note that long-polling should be limited to short durations, as inbound transfers via taler-exchange-wirewatch cannot cause the long polling to be resumed, only transfers within the same exchange can benefit from long polling acceleration.

Payment into an unknown account

  1. If the payer does not know the payee’s account, they can create a purse by computing a public-private key pair.
  2. The payer then uses the /depost API to deposit coins into the purse, using payto://taler/$PURSE_PUB as the target address. Note that the lack of a hostname indicates that the target address is a purse.
  3. The payer shares the purse’s private key and the base URL of the exchange where the purse was created with the payee. This can be done using a taler://purse/BASE_URL/$PURSE_PRIV URL.
  4. The payee uses the new /purse/$PURSE_PUB endpoint to retrieve the purse history, which includes all deposits and withdrawals involving the purse.
  5. The payee can then POST to /purse/$PURSE_PUB/merge a request signed by the purse’s private key to merge the funds into an account. The signature is only over a salted hash of the account public key, thus avoiding disclosure of the account public key in the purse history. The exchange processes the merge request akin to the logic for payments into known accounts, as detailed below, except that no deposit fees are charged at this time. The exchange confirms the merge, allowing the payee to instantly affirm to the user that the amount is inbound (even if it may not be instantly available).

Payment directly into a known account at the same exchange

  1. If the payer knows the payee’s account and uses the same exchange, they may perform an ordinary /deposit operation, paying the usual deposit fee.
  2. The exchange detects the use of the taler wire method, and directly credits the target account.

Payment into known account at a remote exchange

  1. If the payer knows the payee’s account and uses a different exchange, they POST the coins to a new /wad/MASTER_PUB endpoint using the master public key of the target exchange, including a deposit permission, the base URL of the target exchange, and the target account, paying a deposit fee and a new wad fee. The wad fees can be used to cover the cost of the exchange-to-exchange wire transfer.

  2. The payer’s exchange creates a wad grouping all wad requests, executing the transaction when either the wad threshold (maximum number of transactons aggregated per wad) or the wad delay (maximum delay for transfers) has been reached.

  3. If the (aggregated) wire transfer fails (say the /wire endpoint of the payee exchange does not resolve to a valid bank account), the originating exchange automatically creates a full refund for all aggregated deposits and purses (refund fees apply).

    Note

    While the refund fee amount can be reused, these types of refunds are not approved by a merchant’s signature. Thus, we will need a new message type in the coin history to represent these events.

  4. The payee’s exchange observes the wire transfer and uses a GET /wad/{MASTER_PUB}/{WTID} request to obtain details about the target accounts.

  5. When the payer’s exchange is requested to provide information about aggregated transfers under the WTID, it provides a signed list of account public keys and associated amounts that must add up to an amount below the total amount transferred. If they do not, the payee’s exchange does not credit any of the accounts and instead preserves the bogus reply (to justify its inaction with its own auditor) and reports the issue to the auditor of the payer’s exchange (keeping the received funds for future manual resolution).

  6. taler-exchange-wirewatch and the Taler wire gateway API will need to be extended to allow passing inbound wire transfers with WTID and exchange base URL to the exchange. Furthermore, another tool is needed to lookup the wad data at remote exchanges.

Additional considerations

  • Creation of additional accounts per customer can be discouraged by asking for higher fees.
  • The global transaction volume of one customer can be easily determined by authorities, which can then trigger further audits of the customer
  • As a technically expensive but more water-tight measure, normal withdrawals from reserves could be disallowed. Instead, a modified refresh protocol could ensure that whoever has knowledge of the account private key can also learn the private keys of coins withdrawn from that account, thereby removing Taler’s “one-hop withdrawal loohole”.

13.14.6. Alternatives

  • The payer could directly give deposit permissions to the payee. This has two problems:
    1. The payer doesn’t know the wire details of the payee. Thus we would need to introduce some “wildcard deposit permission”, where the exchange allows any wire details on /deposit.
    2. The payment information would be rather large, making it difficult to transfer via a QR code or short text message.
  • Account history exceeding a configurable time limit (like 6 years) could be subject to garbage collection. However, doing so may be difficult to square with onboarding new auditors in the presence of existing accounts, as the auditors could then not reconstruct the account balances from cryptographic proofs.
  • Accounts without KYC check could be eventually closed. However, even if the coins used to fill the account are refunded, it would be difficult to inform the originating wallet that the coins have received a refund. Thus, it is likely simpler to declare the funds forfeit.

13.14.7. Drawbacks

The overall changes required are not small:

  • New KYC fee, wad fee and account history fee required in /keys endpoint (similar to closing and wire fees), requires some work across toolchain (offline signature, etc.)
  • New taler wire method needs special case to possibly bypass (same exchange scenario, with long-poll trigger) the usual aggregation logic.
  • New exchange table(s) required to store inbound amounts by account. Likely two tables, one for local exchange p2p and one for remote exchange p2p payments.
  • New exchange table for pouches required (for remote p2p payments).
  • New exchange logic required to make transfers requests for pouches (another separate process).
  • New /account/$ACCOUNT_PUB/kyc endpoint required.
  • New /purse/$PURSE_PUB/merge endpoint required.
  • Additional tables to be verified by the auditor.
  • taler-exchange-wirewatch needs to support receiving pouch closures and exchange-to-exchange wire transfers with WTIDs.

Aside from implementation complexity, the solution has the following drawbacks:

  • If a p2p payment failed (say the receiver lost the account private key), the customer’s money can be forfeit.