Bitcoin Microtransactions – The Promise And Possibilities

Cryptocurrency succeeds when people use an application (which is running on crypto in the back end) because it is usable, not because it looks good. The perception of cryptocurrency is still that you can’t use it for too many things.

The idea is to bring transaction fees down to as close as 0 as possible, which is where microtransactions would come in. By not having every full node processing every single transactions, we could reduce transaction fees significantly.

Sidechains and hypercube chains are interesting ideas, but not an actual solution to this problem. There is a more modest approach, by solving more restricted problems.

Micropayments happen in series between two parties, for example file storage and paying for bandwidth. With multiple transactions happening through the same channel, you only need to finalize (pay transaction fee) once.

Transactions between two parties would make use of BItcoin’s locktime feature. Funds will be sent gradually over time, or all at once after a certain time limit. Both parties sign the transaction to indicate they agree with the deal.

As a result, frequent payments can have a channel running both ways. Ripple-style propagation becomes possible as well. People would be interconnected with one another, as a path is created between party A and B, also validating all other payments along the same path.

Application : decentralized cloud storage

Paying for two goods : storage and bandwidth

Pay for storage : Merkle tree protocol (Contract can include probabilistic feature)

Pay for bandwidth , micropayment channel per 30 kilobytes

Application : Roads

When going somewhere, specify : destination and time/money preference

Bribe other cars to get out of the way

Time-based and traffic-based road tolls to encourage off-peak usage

Great synergy with decentralized car sharing

Application : Mesh Networking

Everyone in the world can help with sending packets through your smartphone

Professional companies can do long-distance wires (But anyone can set one up without permission)

On-ramp application for sharing your cell or wifi connection

All in all, this was an incredibly interesting talk, brought to us by Vitaik Buterin of Ethereum at the BTC2B Conference in Brussels last week!