NOCUST - A Non-Custodial 2nd-Layer Financial Intermediary

Bitcoin is meant to offer a payment system where the users are custodians of their funds instead of entrusting a trusted financial institution. The limited transaction throughput of such permissionless blockchains, however, results for example in volatile transaction prices that hardly fit into traditional service level agreements required by professional institutions and cannot accommodate microtransactions. We present a novel non-custodial 2nd-layer financial intermediary solution secure against double-spending that guarantees users control of funds through leveraging a smart contract enabled decentralized blockchain ledger as a means of dispute resolution. Twoparty payment channels networks have been proposed as building blocks for trust-free payments that do not exhaust the resources of the blockchain; however, they bear multiple fundamental limitations. NOCUST is a specification for secure N-party payment hubs with improved transaction utility, cheaper operational costs and leaner user enrollment.