This document summarizes information about Bitcoin micropayments. It discusses that while Bitcoin transactions are cheap, they are not cheap enough for micropayments. It then presents a solution of using rapidly adjusted micropayments to a predetermined party. The document also notes issues with small transactions like being caught by anti-flooding algorithms and having fixed minimum transaction values. Additionally, it provides information on Bitcoin scripting and how standard transactions and multisignature transactions work.

1. Bitcoin
Micropayment
Channels
Johann Barbie

2. Micropayments via Bitcoin
Problem:
● Bitcoin transactions are cheap
● But not cheap enough!
Solution:
● Rapidly-adjusted (micro)payments to a predetermined party
source: source: https://docs.google.com/presentation/d/1E4Aglf1sW6EMpNSjjWQ13GoZVPYljnydbghEV7w13nI/edit#slide=id.g237a625f_0_29

3. Issues with small Transactions
1. frequent small transactions will be caught by anti-flooding
algorithms.
2. There is a fixed minimum amount of value a single transaction can
send, determined by the number of bytes required to send and
claim it along with the fees charged.
3. The recipient of the micropayments ends up with a wallet full of
“dust” which can be expensive to spend, fee-wise.
source: http://www.coindesk.com/bitcoin-client-bitcoinj-implements-bitcoin-micropayments/

4. Bitcoin - Script introduction
source: https://en.bitcoin.it/wiki/Script#Standard_Transaction_to_Bitcoin_address_.28pay-to-pubkey-hash.29
Word
Description
OP_DUP
Duplicates the top stack item.
OP_HASH160
The input is hashed twice: first with SHA-256 and then
with RIPEMD-160.
OP_EQUAL
Returns 1 if the inputs are exactly equal, 0 otherwise.
OP_EQUALVERIFY
Same as OP_EQUAL, but runs OP_VERIFY afterward.
OP_CHECKSIG
Hash Transaction, Validate with Signature. If it is, 1 is
returned, 0 otherwise.
OP_CHECKMULTISIG
For each signature and public key pair, OP_CHECKSIG is
executed
OP_VERIFY
Marks transaction as invalid if top stack value is not
true.

5. Standard Transaction:
scriptPubKey: OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG
scriptSig: <sig> <pubKey>
source: https://en.bitcoin.it/wiki/Script#Standard_Transaction_to_Bitcoin_address_.28pay-to-pubkey-hash.29
Stack
Script
Empty.
<sig> <pubKey> OP_DUP OP_HASH160 <pubKeyHash>
OP_EQUALVERIFY OP_CHECKSIG
<sig> <pubKey>
OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY
OP_CHECKSIG
<sig> <pubKey> <pubKey>
OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG
<sig> <pubKey> <pubHashA>
<pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG
<sig> <pubKey> <pubHashA> <pubKeyHash>
OP_EQUALVERIFY OP_CHECKSIG
<sig> <pubKey>
OP_CHECKSIG
true
Empty.

6. K2
K1
send PK2
PK1+PK2
create T1 (1 BTC,
OP_CHECKMULTISIG)

7. K1
send PK2
PK1
create T1 (1 BTC,
OP_CHECKMULTISIG)
create T2 (1 BTC, to K1,
+1H)
sign T1
sign T2

8. K1
send PK2
PK1
create T1 (1 BTC,
OP_CHECKMULTISIG)
create T2 (1 BTC, to K1,
+1H)
sign T1
sign T2
tell K2
create T3 (1-X to K1, X
BTC to K2)
abort ?

9. K1
send PK2
PK1
create T1 (1 BTC,
OP_CHECKMULTISIG)
create T2 (1 BTC, to K1,
+1H)
sign T1
sign T2
tell K2
create T3 (1-X to K1, X
BTC to K2)
sign T3
tell K2
increase X, sign T3 ag
ain
increase X, sign T3 ag
ain
abort ?
tell K2
tell K2

10. PK1
create T1 (1 BTC,
OP_CHECKMULTISIG)
sign T2
create T2 (1 BTC, to K1,
+1H)
sign T1
tell K2
create T3 (1-X to K1, X
BTC to K2)
sign T3
tell K2
increase X, sign T3 ag
ain
tell K2
increase X, sign T3 ag
ain
tell K2
nge
? or receive cha
abort ?
get payed

11. The End
Questions ???
@johba
mail@johba.de