Informatica

Tax Declaration Scheme Using Blockchain Confidential Transactions

Volume 34, Issue 3 (2023), pp. 603–616

Eligijus Sakalauskas Antanas Bendoraitis Dalė Lukšaitė Gintaras Butkus Daiva Vitkutė-Adžgauskienė

https://doi.org/10.15388/23-INFOR531

Pub. online: 18 September 2023 Type: Research Article

Open Access

Received
1 March 2023

Accepted
1 September 2023

Published
18 September 2023

Abstract

The article presents the tax declaration scheme using blockchain confidential transactions based on the modified ElGamal encryption providing additively-homomorphic property. Transactions are based on the unspent transactions output (UTxO) paradigm allowing to effectively represent digital asset of cryptocurrencies in e-wallets and to perform financial operations. The main actors around transaction are specified, include money senders, receivers, transaction creator, Audit Authority (AA) and Net of users. A general transaction model with M inputs and N outputs is created, providing transaction amount confidentiality and verifiability for all actors with different levels of available information.

The transaction model allows Net to verify the validity of a transaction, having access only to encrypted transaction data. Each money receiver is able to decrypt and verify the actual sum that is transferred by the sender. AA is provided with actual transaction values and is able to supervise the tax payments for business actors. Such information allows to verify the honesty of transaction data for each user role.

The security analysis of the scheme is presented, referencing to ElGamal security assumptions. The coalition attack is formulated and prevention of this attack is proposed. It is shown that transaction creation is effective and requires almost the same resources as multiple ElGamal encryption. In addition to ElGamal encryption of all income and expenses, an additional exponentiation operation with small exponents, representing transferred sums, is needed. AA computation resources are slightly larger, since they have to be adequate for search procedures in the small range from 1 to ${2^{32}}-1=4294967295$ for individual money transfers.

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Biographies

Sakalauskas Eligijus

eligijus.sakalauskas@ktu.lt

E. Sakalauskas is a professor in the Department of Applied Mathematics at Kaunas University of Technology. He is the head of Cryptography and Blockchain Research Group. The scope of his scientific interests is new cryptographic method creation and their security analysis. The other area of activity is cryptographic method application to blockchain providing additional functionality and trustworthiness to this technology. He is an author of the presented idea and cryptographic solution of tax collection system using blockchain.

Bendoraitis Antanas

antanas.bendoraitis@ktu.edu

A. Bendoraitis is a second-year master’s degree student in the Faculty of Informatics. He is finishing a competence course in cryptography and blockchain systems in the Department of Applied Mathematics. He is dealing with practical implementation of blockchain technology and provided a simulation of proposed solution.

Lukšaitė Dalė

dale.luksaite@go.kauko.lt

D. Lukšaitė is currently a lecturer at the Department of Informatics of Kauno kolegija Higher Education Institution. She is an expert in software engineering. Her scientific interests are research of development and application of software systems algorithms, blockchain technology. She contributed in literature analysis and protocol construction.

Butkus Gintaras

gintaras.butkus@go.kauko.lt

G. Butkus is currently a lecturer at the Department of Informatics of Kauno kolegija Higher Education Institution. He is an expert in computer networks and security. His scientific interests are blockchain technology, computer networks, cyber security and cryptography. He contributed to simulation of proposed protocol and literature analysis.

Vitkutė-Adžgauskienė Daiva

daiva.vitkute@vdu.lt

D. Vitkutė-Adžgauskienė is a professor and head of Department of Applied Informatics at Vytautas Magnus University (VMU). Her main research interests are process simulation and digital transformation technologies, artificial and augmented intelligence, natural language processing. She is the coordinator of Digital Transformation Group in the Artificial Intelligence and Digitalization Systems Research Cluster at VMU with research focus on digital transformation aspects in different business areas including FinTech and blockchain technologies. She contributed in proposed protocol analysis and verification and literature analysis.

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Keywords

blockchain transactions unspent transaction output confidentiality verifiability

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