This post began as an initiative to improve visibility of one method of micro-payment channels, however after some research it has become evident that numerous parties are striving towards the same goal. Is it too soon to find out more before transaction malleability is addressed?
To date we know of the following people involved in micro-payment channels:
- Joseph Poon and Thaddus Dryja with their Lightning Network
- Tony Gallippi (Impulse or a system similar to the Lightning Network)
- Mike Hearn with Hourglass
- Nick Sullivan of Changetip
- James Poole who demonstrated Http Based Bitcoin Micropayments on youtube
- Pieter Wuille who has proposed input towards BIP 62 to make all of the above possible.
- CEO Martin Zachrison / CFO Olle Kullberg of Strawpay.
Just to bring you up to speed when you return there has been a lot of action from the SF Bitcoin Dev conference. In particular Joseph Poon and Thaddus Dryja have presented a method of supporting billions of bitcoin transactions. It is unique in that it hopes to address malleability while incorperating the op checklocktimeverify, which is something that other developers are interested in.
Here's reddit user BobAlisons attempt to summarize it:
One way to enable millions of transactions per day is to attempt to scale the block chain and network around it. Another way is to build a network on top specifically designed with scalability in mind. That's what Lightning Network is about.
The proposal extends the hub-and-spoke micropayment channel system described here: https://www.mail-archive.com/[email protected]/msg06576.html
Under hub-and-spoke, the hub can steal the payment. However, the damage is limited if you're only sending a micropayment through the channel. If the hub refuses to forward the payment, you just disconnect and find a more trustworthy hub.
But hub-and-spoke can be used to solve a slightly different problem - keeping transactions off the block chain, yet securing them cryptographically and with enforceable contracts, and ultimately settling them on the block chain. The example of an exchange comes to mind.
With larger payments flowing through the channel, you need to trust the hub not to steal them. The Lightning Network solves this problem by making it impossible for the hub to spend the payment. The payer and intended payee negotiate an offset to the hub's key pair before making the payment. Only the intended payee can unlock the funds.
This is somewhat analogous to the way stealth payments work. Payer and payee negotiate an offset to a key pair. The payer pays to the offset public key, but can't unlock the payment. Only the payee can do that.
Youtube link: SF Bitcoin Devs Seminar: Scaling Bitcoin to Billions of Transactions Per...: http://youtu.be/8zVzw912wPo
Reddit thread with interest from peter todd: https://www.reddit.com/r/Bitcoin/comments/2xcq4x/instant_bitcoin_transactions_proposal_lightning/