Off-chain transactions - Revision history

Pancyrus: Pancyrus moved page Off-Chain Transactions to Off-chain transactions: Not a proper noun, so it shouldn't be in capital-case.

2021-03-21T05:17:10Z

Pancyrus moved page Off-Chain Transactions to Off-chain transactions: Not a proper noun, so it shouldn't be in capital-case.

← Older revision		Revision as of 05:17, 21 March 2021
(No difference)

Sgornick: /* Methods */ Add Hardware-Based subsection, with entries for OpenDime and Tangem Smartnotes.

2019-06-18T04:43:25Z

Methods: Add Hardware-Based subsection, with entries for OpenDime and Tangem Smartnotes.

← Older revision		Revision as of 04:43, 18 June 2019
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	If the communication protocol between client and service is designed correctly fraud by the service can be proven to others. For instance if the service cryptographically signs all communications an inconsistency between the claimed merkle-tip of the accounts held by the service and the merkle-path from a particular account to that tip can be proven by providing the signed tip, and the signed merkle-path. This fraud proof can be self-authenticating, and thus anyone who comes in possession of such a proof can broadcast it to their peers. With appropriate software all participating clients of the service can be informed of any fraud immediately taking "advantage of the nature of information being easy to spread but hard to stifle" - a core concept underlying the security of Bitcoin itself.<ref>[http://sourceforge.net/mailarchive/message.php?msg_id=30482839 Satoshi]</ref>		If the communication protocol between client and service is designed correctly fraud by the service can be proven to others. For instance if the service cryptographically signs all communications an inconsistency between the claimed merkle-tip of the accounts held by the service and the merkle-path from a particular account to that tip can be proven by providing the signed tip, and the signed merkle-path. This fraud proof can be self-authenticating, and thus anyone who comes in possession of such a proof can broadcast it to their peers. With appropriate software all participating clients of the service can be informed of any fraud immediately taking "advantage of the nature of information being easy to spread but hard to stifle" - a core concept underlying the security of Bitcoin itself.<ref>[http://sourceforge.net/mailarchive/message.php?msg_id=30482839 Satoshi]</ref>

			===Hardware-Based===

			* [https://opendime.com OpenDime]
			* [https://tangem.com Tangem SmartNotes]

	== References ==		== References ==

Belcher: /* Sidechains */ Fix broken link

2019-02-20T15:02:12Z

Sidechains: Fix broken link

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	=== Sidechains ===		=== Sidechains ===

	Another potential technology for off-chain transaction is [[~~sidechains~~]], which is where bitcoins are moved onto another blockchain which can support transactions with different properties to bitcoin's blockchain.		Another potential technology for off-chain transaction is [[sidechain]]s, which is where bitcoins are moved onto another blockchain which can support transactions with different properties to bitcoin's blockchain.

	=== Credit-Based Solutions ===		=== Credit-Based Solutions ===

Belcher: /* References */ Add to category privacy and scalability

2019-02-15T19:51:48Z

References: Add to category privacy and scalability

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	[[Category:Technical]]		[[Category:Technical]]
			[[Category:Scalability]]
			[[Category:Privacy]]

Belcher: edited this article to mention lightning network and sidechains

2017-12-07T23:27:34Z

edited this article to mention lightning network and sidechains

← Older revision		Revision as of 23:27, 7 December 2017
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	== Methods ==		== Methods ==

			=== Payment Channels ===

			The most promising by far method of building a off-chain transaction system is [[Lightning Network]]. It is a proposed implementation of [[Hashed Timelock Contracts]] (HTLCs) with bi-directional [[payment channels]] which allows payments to be securely routed across multiple peer-to-peer payment channels. This allows the formation of a network where any peer on the network can pay any other peer even if they don't directly have a channel open between each other. Very little third-party trust is required.

			Main article: [[Lightning Network]]

			=== Sidechains ===

			Another potential technology for off-chain transaction is [[sidechains]], which is where bitcoins are moved onto another blockchain which can support transactions with different properties to bitcoin's blockchain.

			=== Credit-Based Solutions ===

	The most simple example of an off-chain transaction is perhaps two friends who agree on a debt between them. The "transaction" happens by the act of agreeing that the debt exists, and the validity of it is based solely on the trust that one friend has in the other. Further transactions can be agreed upon, possibly in exchange for something of value such one friend buying the other a meal. Multiple mutually trusting parties can participate, creating a network of value owed from one to the other. As an example the [http://en.wikipedia.org/wiki/Ripple_monetary_system Ripple monetary system] takes this concept, and adds to it an automated ledger to record all the mutual debts between participating parties. However actually acting upon those debts is still a matter of trust between the parties; the system only records debts and can-not by itself cause Bitcoins or some other object of value to change hands. In theory, the use of multi-signature techniques offers the promise of secure Off-Chain transactions <ref>[http://www.bincoin.com/cryptocubic.pdf A CryptoCubic Protocol for Hacker-Proof Off-Chain Bitcoin Transactions]</ref>. However, the practical applications of such "CryptoCubic" approaches have yet to be confirmed.		The most simple example of an off-chain transaction is perhaps two friends who agree on a debt between them. The "transaction" happens by the act of agreeing that the debt exists, and the validity of it is based solely on the trust that one friend has in the other. Further transactions can be agreed upon, possibly in exchange for something of value such one friend buying the other a meal. Multiple mutually trusting parties can participate, creating a network of value owed from one to the other. As an example the [http://en.wikipedia.org/wiki/Ripple_monetary_system Ripple monetary system] takes this concept, and adds to it an automated ledger to record all the mutual debts between participating parties. However actually acting upon those debts is still a matter of trust between the parties; the system only records debts and can-not by itself cause Bitcoins or some other object of value to change hands. In theory, the use of multi-signature techniques offers the promise of secure Off-Chain transactions <ref>[http://www.bincoin.com/cryptocubic.pdf A CryptoCubic Protocol for Hacker-Proof Off-Chain Bitcoin Transactions]</ref>. However, the practical applications of such "CryptoCubic" approaches have yet to be confirmed.

	=== Trusted Third Parties ===		==== Trusted Third Parties ====

	If the sender and recipient do not trust each other, or would simply prefer someone else record and guarantee the transaction, they can use a [http://en.wikipedia.org/wiki/Trusted_third_party trusted third party] to record and guarantee the transaction. The vast majority of conventional banking and electronic payment systems work this way. For instance in the PayPal system, PayPal is trusted to keep an accurate record of all transactions, including within the PayPal system, as well as transactions that move funds to and from PayPal. Within Bitcoin [[Redeemable_code\|redeemable code]] systems exist where a third party, such as Mt. Gox, records codes issued and promise to redeem them for either new codes, balances within the system, or Bitcoins via on-chain transactions. In addition [[E-Wallet]] services such as [[Easywallet.org]] often allow users to transfer funds between addresses within the system without creating an on-chain transaction.		If the sender and recipient do not trust each other, or would simply prefer someone else record and guarantee the transaction, they can use a [http://en.wikipedia.org/wiki/Trusted_third_party trusted third party] to record and guarantee the transaction. The vast majority of conventional banking and electronic payment systems work this way. For instance in the PayPal system, PayPal is trusted to keep an accurate record of all transactions, including within the PayPal system, as well as transactions that move funds to and from PayPal. Within Bitcoin [[Redeemable_code\|redeemable code]] systems exist where a third party, such as Mt. Gox, records codes issued and promise to redeem them for either new codes, balances within the system, or Bitcoins via on-chain transactions. In addition [[E-Wallet]] services such as [[Easywallet.org]] often allow users to transfer funds between addresses within the system without creating an on-chain transaction.
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	The difficulty with third-parties is achieving that trust. Outside of Bitcoin PayPal has been criticized<ref>[http://en.wikipedia.org/wiki/PayPal#Criticism PayPal - Criticism]</ref> for arbitrarily freezing accounts. Within Bitcoin multiple E-Wallet services such as [[MyBitcoin]] and [[Instawallet]] have failed due to hacks as well as technical mistakes resulting in the loss of some or all funds held on behalf of their customers.		The difficulty with third-parties is achieving that trust. Outside of Bitcoin PayPal has been criticized<ref>[http://en.wikipedia.org/wiki/PayPal#Criticism PayPal - Criticism]</ref> for arbitrarily freezing accounts. Within Bitcoin multiple E-Wallet services such as [[MyBitcoin]] and [[Instawallet]] have failed due to hacks as well as technical mistakes resulting in the loss of some or all funds held on behalf of their customers.

	=== Auditing ===		==== Auditing ====

	In addition to hacks, currently no trusted third party payment systems in Bitcoin provide any way for users to determine if the services actually hold the Bitcoins they claim to hold. Conventionally banks and payment processors are [http://en.wikipedia.org/wiki/Financial_audit audited] regularly by third-parties - because Bitcoin is based on cryptography auditing can be done in a cryptographically provable way.		In addition to hacks, currently no trusted third party payment systems in Bitcoin provide any way for users to determine if the services actually hold the Bitcoins they claim to hold. Conventionally banks and payment processors are [http://en.wikipedia.org/wiki/Financial_audit audited] regularly by third-parties - because Bitcoin is based on cryptography auditing can be done in a cryptographically provable way.
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	Clients check that their account is included in that tree by regularly demanding proof, in the form of a merkle path, that their account leads to the claimed tip. Any discrepancy is evidence of fraud on by the service, or at least poor record-keeping.		Clients check that their account is included in that tree by regularly demanding proof, in the form of a merkle path, that their account leads to the claimed tip. Any discrepancy is evidence of fraud on by the service, or at least poor record-keeping.

	=== Proving Fraud ===		==== Proving Fraud ====

	If the communication protocol between client and service is designed correctly fraud by the service can be proven to others. For instance if the service cryptographically signs all communications an inconsistency between the claimed merkle-tip of the accounts held by the service and the merkle-path from a particular account to that tip can be proven by providing the signed tip, and the signed merkle-path. This fraud proof can be self-authenticating, and thus anyone who comes in possession of such a proof can broadcast it to their peers. With appropriate software all participating clients of the service can be informed of any fraud immediately taking "advantage of the nature of information being easy to spread but hard to stifle" - a core concept underlying the security of Bitcoin itself.<ref>[http://sourceforge.net/mailarchive/message.php?msg_id=30482839 Satoshi]</ref>		If the communication protocol between client and service is designed correctly fraud by the service can be proven to others. For instance if the service cryptographically signs all communications an inconsistency between the claimed merkle-tip of the accounts held by the service and the merkle-path from a particular account to that tip can be proven by providing the signed tip, and the signed merkle-path. This fraud proof can be self-authenticating, and thus anyone who comes in possession of such a proof can broadcast it to their peers. With appropriate software all participating clients of the service can be informed of any fraud immediately taking "advantage of the nature of information being easy to spread but hard to stifle" - a core concept underlying the security of Bitcoin itself.<ref>[http://sourceforge.net/mailarchive/message.php?msg_id=30482839 Satoshi]</ref>
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	<references/>		<references/>

			[[Category:Technical]]

Skyler827: Corrected the spelling of "rational" (adj) to "rationale" (noun)

2016-06-11T14:22:52Z

Corrected the spelling of "rational" (adj) to "rationale" (noun)

← Older revision		Revision as of 14:22, 11 June 2016
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	With an on-chain transaction those questions are answered by the parties faith in the Bitcoin system as a whole. For instance a transaction (after some number of [[Confirmation\|confirmations]]) can only be reversed if a majority of hashing power agrees to reverse the transaction. The parties to the transaction are trusting that the majority of hashing power in existence is controlled by "honest" parties who will not attempt to reverse the transaction.		With an on-chain transaction those questions are answered by the parties faith in the Bitcoin system as a whole. For instance a transaction (after some number of [[Confirmation\|confirmations]]) can only be reversed if a majority of hashing power agrees to reverse the transaction. The parties to the transaction are trusting that the majority of hashing power in existence is controlled by "honest" parties who will not attempt to reverse the transaction.

	== ~~Rational~~ ==		== Rationale ==

	On-chain transactions have disadvantages that make them unsuitable for some applications:		On-chain transactions have disadvantages that make them unsuitable for some applications:

Leo restoration at 02:49, 2 August 2014

2014-08-02T02:49:57Z

← Older revision		Revision as of 02:49, 2 August 2014
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	== Methods ==		== Methods ==

	The most simple example of an off-chain transaction is perhaps two friends who agree on a debt between them. The "transaction" happens by the act of agreeing that the debt exists, and the validity of it is based solely on the trust that one friend has in the other. Further transactions can be agreed upon, possibly in exchange for something of value such one friend buying the other a meal. Multiple mutually trusting parties can participate, creating a network of value owed from one to the other. As an example the [http://en.wikipedia.org/wiki/Ripple_monetary_system Ripple monetary system] takes this concept, and adds to it an automated ledger to record all the mutual debts between participating parties. However actually acting upon those debts is still a matter of trust between the parties; the system only records debts and can-not by itself cause Bitcoins or some other object of value to change hands.		The most simple example of an off-chain transaction is perhaps two friends who agree on a debt between them. The "transaction" happens by the act of agreeing that the debt exists, and the validity of it is based solely on the trust that one friend has in the other. Further transactions can be agreed upon, possibly in exchange for something of value such one friend buying the other a meal. Multiple mutually trusting parties can participate, creating a network of value owed from one to the other. As an example the [http://en.wikipedia.org/wiki/Ripple_monetary_system Ripple monetary system] takes this concept, and adds to it an automated ledger to record all the mutual debts between participating parties. However actually acting upon those debts is still a matter of trust between the parties; the system only records debts and can-not by itself cause Bitcoins or some other object of value to change hands. In theory, the use of multi-signature techniques offers the promise of secure Off-Chain transactions <ref>[http://www.bincoin.com/cryptocubic.pdf A CryptoCubic Protocol for Hacker-Proof Off-Chain Bitcoin Transactions]</ref>. However, the practical applications of such "CryptoCubic" approaches have yet to be confirmed.

	=== Trusted Third Parties ===		=== Trusted Third Parties ===

WalletBit at 19:01, 9 November 2013

2013-11-09T19:01:40Z

← Older revision		Revision as of 19:01, 9 November 2013
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	Miners usually charge [[Transaction fees\|fees]] to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable.<ref>[https://bitcointalk.org/index.php?topic=156334.0 How to send Bitcoins with LOW TX FEE (Not No TX Fee)]</ref> In addition Bitcoin currently has a limit of 7 transactions per second, the [[blocksize limit]]. This limit is related to the [[Scalability\|scalability]] of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.		Miners usually charge [[Transaction fees\|fees]] to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable.<ref>[https://bitcointalk.org/index.php?topic=156334.0 How to send Bitcoins with LOW TX FEE (Not No TX Fee)]</ref> In addition Bitcoin currently has a limit of 7 transactions per second, the [[blocksize limit]]. This limit is related to the [[Scalability\|scalability]] of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.

	~~Currently, [[Inputs.io]] is the only offchain payment network that provides all three benefits.~~

	== Methods ==		== Methods ==

Jaxkr at 06:31, 28 July 2013

2013-07-28T06:31:59Z

← Older revision		Revision as of 06:31, 28 July 2013
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	=== Speed ===		=== Speed ===

	On-chain transactions take some time to accumulate enough [[Confirmation\|confirmations]] to ensure that they can-not be reversed; accepting a transaction ~~[[Zero-Conf Transactions\|~~without any confirmations]] is potentially risky. Confirmations take time and the time they take to accumulate is random. Off-chain transaction systems can record that a transaction has happened immediately, and, subject to the guarantees of the system itself, immediately guarantee it won't be reversed.		On-chain transactions take some time to accumulate enough [[Confirmation\|confirmations]] to ensure that they can-not be reversed; accepting a transaction without any confirmations is potentially risky. Confirmations take time and the time they take to accumulate is random. Off-chain transaction systems can record that a transaction has happened immediately, and, subject to the guarantees of the system itself, immediately guarantee it won't be reversed.

	=== Privacy/Anonymity ===		=== Privacy/Anonymity ===
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	=== Cost/Scalability ===		=== Cost/Scalability ===

	Miners usually charge [[Transaction fees\|fees]] to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable.<ref>[https://bitcointalk.org/index.php?topic=156334.0 How to send ~~BitCoins~~ with LOW TX FEE (Not No TX Fee)]</ref> In addition Bitcoin currently has a limit of 7 transactions per second, the [[blocksize limit]]. This limit is related to the [[Scalability\|scalability]] of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.		Miners usually charge [[Transaction fees\|fees]] to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable.<ref>[https://bitcointalk.org/index.php?topic=156334.0 How to send Bitcoins with LOW TX FEE (Not No TX Fee)]</ref> In addition Bitcoin currently has a limit of 7 transactions per second, the [[blocksize limit]]. This limit is related to the [[Scalability\|scalability]] of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.

	Currently, [[~~File:inputs.png\|link=https://inputs~~.io]~~] [https://inputs.io Inputs.io~~] is the only offchain payment network that provides all three benefits.		Currently, [[Inputs.io]] is the only offchain payment network that provides all three benefits.

	== Methods ==		== Methods ==

Gladoscc: /* Cost/Scalability */

2013-07-10T10:59:46Z

Cost/Scalability

← Older revision		Revision as of 10:59, 10 July 2013
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	Miners usually charge [[Transaction fees\|fees]] to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable.<ref>[https://bitcointalk.org/index.php?topic=156334.0 How to send BitCoins with LOW TX FEE (Not No TX Fee)]</ref> In addition Bitcoin currently has a limit of 7 transactions per second, the [[blocksize limit]]. This limit is related to the [[Scalability\|scalability]] of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.		Miners usually charge [[Transaction fees\|fees]] to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable.<ref>[https://bitcointalk.org/index.php?topic=156334.0 How to send BitCoins with LOW TX FEE (Not No TX Fee)]</ref> In addition Bitcoin currently has a limit of 7 transactions per second, the [[blocksize limit]]. This limit is related to the [[Scalability\|scalability]] of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.

	Currently, [File:inputs.png\|link=https://inputs.io]] [https://inputs.io Inputs.io] is the only offchain payment network that provides all three benefits.		Currently, [[File:inputs.png\|link=https://inputs.io]] [https://inputs.io Inputs.io] is the only offchain payment network that provides all three benefits.

	== Methods ==		== Methods ==