LIoTning: A Peer-Supervised Payment Channel Approach for Secure Micropayments in IoT Ecosystem

The rapid proliferation of the Internet of Things has heightened the demand for efficient, low-cost micropayments to support seamless service provisioning—a requirement fundamentally at odds with the inherent scalability issues of blockchain technology. Digital assets like Bitcoin, despite offering a decentralized and cryptographically secure foundation for the machine-to-machine (M2M) economy, struggle to accommodate high-frequency transactions. While payment channel networks (PCNs) propose an innovative off-chain solution to bypass blockchain bottlenecks, they remain impractical for resource-constrained IoT devices, where stringent storage, memory, and processing restrictions make PCN architectures infeasible. Previous studies have attempted to integrate off-chain payments with IoT devices while addressing threats in this domain—particularly broadcasting old states. However, their reliance on third-party entity/entities, software modifications, trusted hardware, or overhead-intensive protocols leaves critical gaps unresolved. To bridge this gap, we propose LIoTning, a peer-supervised payment channel protocol with $N+2$ participants operating under the honest majority assumption: two devices (sender and receiver) and N peers, including resource-efficient IoT devices and blockchain nodes—that collaboratively track and maintain full-state commitment transactions. To minimize storage and communication overhead, each full-state commitment embeds intermediate transactions. We formally prove the security of the LIoTning protocol in the Universal Composability (UC) framework, analyze its resilience against broadcasting revoked states, collusion, and ransom attacks, and implement the proposed model to evaluate its performance under different scenarios. Our evaluation results show that the model enables fast payments over low-bandwidth wireless networks. It demonstrates that, with practical parameters, the proposed model can achieve a throughput of at least 200 transactions per second with a network bandwidth of 300 kBps, which is fairly within the capabilities of IoT devices.