BlockArc: A Blockchain-Based Smart Contract Framework for Reward System Management in Banking

The accelerating digitization of financial services has intensified demands for transparency, accountability, and operational efficiency within banking reward programs. Traditional centralized loyalty architectures suffer from fragmentation across institutions, susceptibility to fraudulent manipulation, limited auditability, and prohibitive overhead costs associated with third-party reward management intermediaries. This paper presents BlockArc, a novel permissioned blockchain architecture underpinned by self-executing Ethereum smart contracts, specifically engineered to address these systemic deficiencies in banking reward management. The proposed framework is structured across four tightly integrated layers: a Proof of Authority (PoA) Blockchain Layer providing immutable transaction recording; a Smart Contract Layer automating BankToken issuance, redemption, and expiration logic; an Application Layer delivering an intuitive banking portal and decentralized application (dApp); and a User Roles Layer defining distinct permission boundaries for customers, merchants, and administrators. Security is reinforced through a multi-layered defense incorporating cryptographic SHA-256 hashing, Zero-Knowledge Proofs (ZKPs) for privacy-preserving balance verification, Role-Based Access Control (RBAC) for privilege enforcement, and Chainlink decentralized oracle networks for tamper-resistant off-chain data integration. Empirical evaluation on a simulated permissioned testnet environment demonstrated system throughput of 112 transactions per second (TPS) under moderate load conditions, 100% fraud detection accuracy across all tested attack vectors, end-to-end reward processing latency of 3.2 seconds, and a 37% reduction in operational expenditure by eliminating intermediary dependencies. A pilot study involving 50 participants reported a mean satisfaction score of 4.6/5 for transparency and 4.4/5 for usability. The paper further presents a formal STRIDE-based security analysis, gas optimization strategies, a cross-institutional use case evaluation, and a comparative benchmarking of BlockArc against centralized, public Ethereum, and Hyperledger Fabric deployments. Findings establish BlockArc as a viable, scalable, and compliance-ready foundation for next-generation digital banking reward ecosystems.