21st Century’s Microtransaction Channel, a Temporary Scalability Solution for Bitcoin?

21 Inc, a bitcoin company that has raised a massive $116 million in funding, recently launched a high-frequency microtransaction payment channel that users can use to make small payments in order to reduce the burden on the bitcoin blockchain.

As the Bitcoin block size debate rages within the Bitcoin community, 21 has introduced this new payment system that allows high-frequency microtransactions between two 21 Bitcoin computers. Currently, this new micropayment method is supported on 21 Bitcoin computers, and it is expected to be ported to other machines at some point in the future.

The new Bitcoin microtransaction library is designed to perform very tiny Bitcoin transactions between devices without creating hundreds of entries on the Bitcoin blockchain.

It does not need to record every transaction on the blockchain. It is reported that this high-frequency micropayment function uses nSequence and LockTime functions. By using this function, the Bitcoin computer application of 21 can accumulate Bitcoin for a period of time and then set it to be sent once at a certain time in the future. It can also be used to send continuous Bitcoin flow transactions over a period of time. Within a certain period of time, each individual micro transaction will not write the transaction information to the blockchain.

21 Company's High-Frequency Micro-Transaction Channel, a Game Changer?

In a blog post, the founders of 21 provided detailed information about the new feature. 21's Bitcoin computer is based on the Raspberry Pi 2, so it can be connected to a regular computer running any off-the-shelf operating system. Although its computing power is still modest, the Bitcoin computer can still mine a small amount of Bitcoin, which is then stored in the built-in wallet, which can be used to trade with other Bitcoin computers at any time.

When a user first mines on a Bitcoin computer, they receive an initial upfront reward. In order to utilize micropayment channels, they must deposit an initial amount of funds, which can be done through the rewards received from Bitcoin mining.

There are currently issues with Bitcoin transaction malleability where nodes can corrupt transaction data, creating an invalid transaction hash. In this case, even if the recipient receives the original transaction, he may not be able to spend the funds in the future because the previous transaction hash associated with a specific Bitcoin may be invalid. Currently, Jeremy Spilman-style payment channels are prone to transaction malleability issues. 21's micropayment channel uses the CLTV (CheckLockTimeVerify) opcode, which can create provably disposable outputs, thereby eliminating Bitcoin's transaction malleability issues. To learn more about the CLTV opcode, visit here.

Bitcoin micropayment channels could be a temporary solution to the existing Bitcoin scalability problem. Such micropayment channels only create two entries on the blockchain, one when the channel is proposed and another when it is terminated. No matter how many transactions occur on this channel, only two entries will be generated in the end.

Original article: http://www.newsbtc.com/2016/02/13/21-inc-microtransactions-scalability-solution/
Author: Gautham
Compilation: Overnight porridge
Source (translation): Babbitt Information (http://www.8btc.com/21-inc-microtransactions)