Design of a Lightweight Smart Wallet Protocol for IoT-Based Blockchain Microtransactions

Abstract

The rapid growth of Internet of Things (IoT) ecosystems has led to a significant demand for secure,
low-latency, and energy-efficient financial transactions among interconnected devices. Traditional blockchain-based
payment solutions are computationally intensive and unsuitable for resource-constrained embedded platforms. This
study proposes a lightweight smart wallet protocol optimized for IoT microtransactions using minimalistic smart
contracts, energy-aware cryptography, and Layer-2 blockchain scalability mechanisms. The protocol integrates an
event-driven transaction pipeline and a compressed signature verification model to minimize execution overhead
while ensuring trust, auditability, and fault tolerance. Experimental deployment on Raspberry Pi 4 and ESP32
development boards demonstrates a substantial reduction in gas consumption, transaction latency, and memory
footprint compared to conventional blockchain clients. Additionally, the protocol achieves real-time machine-to
machine (M2M) payments through an adaptive off-chain payment channel framework that supports high-frequency
microtransactions. Performance benchmarking reveals improvements in throughput, scalability, and power
efficiency under heterogeneous network conditions. The results confirm that the proposed smart wallet architecture
is suitable for large-scale IoT environments such as smart homes, vehicular systems, industrial automation, and
distributed sensor networks, offering a secure and cost-effective alternative to conventional blockchain-based
payment layers.