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Bitcoin Micropayment Channels
@meinharrd | @SatoshiPay
Bitcoin transactions shortcomings:
Not instant
Blockchain bloat
Relatively high fees
Solution: Smart Contracts
Micropayment Channels
Contract between sender and receiver
Funds parked on multi-signature escrow address
Transaction drafts exchanged “off-chain”
Contract can be executed by both partiesat any given time
Sender Recipient
Direct bitcoin transaction (tx)
TxSender Recipient
Direct bitcoin transaction (tx)
TxSender Recipient
Direct bitcoin transaction (tx)Not suitable for payments below €0.50
● Too expensive (~€0.05/tx)● Too many (bitcoin currently allows 3 tx/s in total)● Too slow (min. 10 minutes confirmation time)
Escrow
Sender Recipient
Funding TxEscrow
Sender Recipient
Funding Tx
Refund Tx
Escrow
Sender Recipient
Funding Tx
Refund Tx
Payout Tx
Negotiation
Escrow
Sender Recipient
Funding Tx
Refund Tx
SignaturePayout Tx
Signature
Negotiation
Escrow
Sender Recipient
Funding Tx
Refund Tx
Payout Tx
SignaturePayout Tx
Signature
Negotiation
Escrow
Sender Recipient
Funding Tx
Refund Tx
Payout Tx
SignaturePayout Tx
Bitcoin Network
Signature
Negotiation
Escrow
Sender Recipient
Funding Tx
Refund Tx
Payout Tx
SignaturePayout Tx
Bitcoin Network
Signature
Negotiation
Payment Channel
Escrow
Sender Recipient
Funding Tx
Refund Tx
Payout Tx
SignaturePayout Tx
Bitcoin Network
Signature
Negotiation
Payment Channel
Escrow
Sender Recipient
No fees apart from 2 transactions
Instant
No blockchain bloat
Allows nanopayments
