Does Bitcoin Need Accounts? One Developer Thinks So, and He Figured Out How


Bitcoin doesn’t use typical “accounts.” As an alternative, with every cost, the funds are despatched to a novel “transaction output.” In such an output, the Bitcoin deal with can doubtlessly be reused, by which case the deal with would act a bit like a Bitcoin account. Reusing addresses on this method, nevertheless, makes it trivial to hyperlink totally different cash and transactions to the identical person, which is horrible for privateness. Bitcoin customers are as an alternative inspired to generate a brand new deal with for every receiving cost.

Whereas a finest observe for privateness, Spanish developer José Femenías Cañuelo believes this isn’t precisely person pleasant.

“We’re considerably used to Bitcoin funds the best way they’re, however it’s actually an atrocity,” Cañuelo informed Bitcoin Journal. “It’s like utilizing the web with out domains, relying solely on IP addresses — solely worse, as a result of crypto addresses are method longer, uglier and always altering.”

To resolve this subject, over the previous yr, the developer found out the way to bolt an account system on high of Bitcoin. Having extensively detailed the concept in a brand new white paper, Femenías is now proposing his Layer 2 protocol: Easypaysy.

Whereas preserving Bitcoin’s most dear attributes — corresponding to privateness and self-sovereignty (no have to depend on custodians) — the Spaniard believes his proposal would enhance the Bitcoin person expertise considerably: It could allow non-repudiation, recurring funds, and extra.

Easypaysy Bitcoin Accounts

As a key property of Femenías’ proposal, Easypaysy wouldn’t depend upon any exterior supply. Each establishing the account in addition to utilizing all of it occurs on the Bitcoin blockchain itself.

That is attainable as a result of an account is created with a particular transaction. This transaction has one enter (the “sending” half of the transaction), which features a two-of-two multisignature (multisig) deal with. Which means two public keys are revealed, signing the transaction. The transaction additionally has one output (the “receiving” half), which is an OP_RETURN output. On this case, the output doesn’t truly obtain any funds; it simply features a little bit of information.

The 2 public keys used within the enter belong to the account proprietor who additionally created the transaction, and each keys serve a perform. The primary public key is known as the “Identification key,” and it’s basically the account holder’s digital identification. Anybody who needs to speak with him privately should use this public key to encrypt the messages. The second public key is known as the “Worth key,” and it’s used to obtain funds.

There are two totally different public keys as an alternative of 1 as a result of the Worth secret is much more worthwhile than the Identification key: The latter is used for messages, the previous for cash. “The Identification key should be ‘on-line,’” Femenías defined. “That opens it as much as vulnerabilities, in the identical method that on-line wallets are extra uncovered than offline wallets. It might be smart to maintain the Worth key in chilly storage, whereas the Identification secret is extra actively used to speak.”

The OP_RETURN textual content within the output, then, additionally serves a perform. It’s a small JSON doc (a machine-readable information format) referred to as the “Rendezvous descriptor.” This doc accommodates details about the account. Particularly, it particulars which kinds of funds the account proprietor is prepared to simply accept and how. (Certainly, Femenías’ proposal helps numerous kinds of cost; extra on this later.)

The 2 public keys and the Rendezvous descriptor are all the data the account must include. When this particular account-creation transaction is drafted, a payment is added (as such, the multisig deal with should have been minimally funded), and it’s broadcasted to the Bitcoin community to be included in a block.

Easypaysy Bitcoin Account IDs

Now individuals want to have the ability to discover the account.

That is the place Femenías slipped in one of many nifty tips of his proposal. As soon as the transaction is included in a block, the account is routinely assigned an account ID, based mostly on its place within the blockchain. Particularly, the account ID consists of the precise block that the transaction is included in, and the placement of the transaction in that block. That is mixed with a blockchain identifier and a checksum.

Like so: blockchain@block.transaction/checksum.

Let’s have a look at this step-by-step, with a random instance.

Say we’re utilizing Bitcoin. The blockchain identifier, then, is “btc.”

And let’s say the transaction is included in block 543,847. (This can be a actual Bitcoin block, mined in October 2018 — however that’s not essential; we’re simply making one thing up for now.)

Let’s additionally say that the transaction is the 636th transaction in that block. (Once more, this transaction truly exists, however we’re simply making one thing up right here; there’s no have to search for the precise transaction.)

The checksum, lastly, is a cryptographic trick for additional safety.

“It’s extracted by hashing three gadgets,” Femenías stated, “the hash of the block that features the account, the Merkle root of that block, and the hash of the account transaction itself. Thus, if anybody tries to ship you unhealthy account information, you’ll be able to simply detect it.”

In our instance, the checksum can be 577.

So, the 636th transaction included in Bitcoin block quantity 543,847 would end in account ID: btc@543847.636/577. Extra particularly, this could be the “canonical ID,” because the block, transaction and checksum are proven in numbers.

To make it much more sensible, this canonical ID — btc@543847.636/577 — will also be expressed as a “mnemonic ID.” Leveraging the BIP 39 phrase format, used for Bitcoin pockets seeds, the numbers within the account ID could be transformed into a few phrases (or mixtures of phrases). This ought to be simpler for people to memorize.

The numbers within the account ID of this instance could be minimize into three chunks.

543847 = cancel-mind

636 = exhibit

577 = movement

As such, the mnemonic ID from this instance can be: btc@cancel-mind.exhibit/movement.

Lastly, the Easypaysy white paper additionally proposes “Area IDs,” which might depend upon the Area Title System (DNS). Briefly, such IDs would come with an precise area title, in addition to a blockchain identifier and a checksum, and hyperlink it to an account ID by way of the DNS system. For instance, a site ID would appear to be this:

A majority of these IDs would depend on an exterior supply (DNS) and would price cash and some effort to keep up. Femenías expects they’d most likely solely be fascinating to industrial events.


So we’ve an account and an account ID. Now, somebody — let’s simply name him “the payer” — needs to pay the proprietor of our account, who we’ll name “the payee.” The payer has the payee’s mnemonic ID, as a result of the payee gave it to him. (The account ID, in no matter type, can merely be shared with anybody, like an e mail deal with or a cellphone quantity.)

To make the cost, step one for the payer is to transform the mnemonic ID again into the canonical ID. This step is trivial. Utilizing the BIP 39 format, the payer merely converts the phrases within the mnemonic ID again into numbers, and finally ends up with the canonical ID: btc@543847.636/577.

With the canonical ID, the payer can use the checksum to be sure that the block top and the transaction quantity match. This isn’t strictly needed, however it serves as an additional test to ensure there have been no typos within the account, or perhaps to forestall somebody from nefariously handing over a similar-looking account.

Both method, the payer now is aware of the place to search out the account: It’s the 636th transaction in block 543,847. So he appears to be like it up.

This transaction then contains the Rendezvous descriptor: the JSON doc within the OP_RETURN output. This Rendezvous descriptor specifies which kinds of funds the account is prepared to obtain and how. This may be all sorts supported by the protocol or any choice of them.

Of the cost varieties that the payee accepts, the payer picks his favourite and makes the cost. Achieved.

Cost Varieties

So which cost varieties are attainable? Femenías’ protocol contains 4 cost varieties.

Kind zero

The primary cost sort — sort zero — is the only sort but in addition the worst one for privateness. Kind zero funds are principally simply funds to the Worth key and, subsequently, contain reusing the corresponding deal with, like many donation addresses do as we speak. Femenías truly discourages this sort, however he nonetheless wished to incorporate it within the protocol as an possibility for many who actually need to use it.

Kind 1

The second cost sort — sort 1 — requires interplay. For this sort, the payer contacts the payee to ask for a brand new Bitcoin deal with. The Easypaysy protocol is versatile in how this contact is made; it may be by e mail, by way of an online web page, in a chat app or by another means.

When the deal with is offered (let’s say by way of e mail), the payee additionally indicators the deal with along with his Identification key. This provides affirmation to the payer that the deal with is absolutely the payee’s — and not an deal with belonging to a hacker that gained entry to the payee’s e mail account, for instance.

Kind 2

The third cost sort — sort 2 — requires no interplay. Resembling tips beforehand used for stealth addresses, sort 2 funds let the payer generate a brand new Bitcoin deal with for the payee, from which the payee (and solely the payee) can spend.

To do that, the payer must generate a single-use public key pair. Utilizing the non-public key of this key pair, together with the payee’s Worth key, the payer generates a brand new public key and corresponding Bitcoin deal with. The payer sends the funds to this new deal with, and — importantly — provides the single-use public key to the identical transaction as an OP_RETURN output.

Apparently, the payee can use this single-use public key together along with his Worth key to generate a brand new non-public key that corresponds with the brand new public key, and thus the corresponding Bitcoin deal with. In different phrases, if the payee learns of the single-use public key, he (and solely he) can spend the funds from the brand new Bitcoin deal with.

To study of the single-use public key, the payee is both notified of the transaction by the payer, or the payee merely checks all new Bitcoin transactions with an OP_RETURN output. For every OP_RETURN output, he checks if it’s a public key that he can mix along with his non-public Worth key to spend the funds included in that transaction. This may typically not be the case. However when it is the case, he is aware of he’s been paid.

(To learn how this works in somewhat extra element, see this text on stealth addresses and reusable cost codes.)

Kind three

The fourth cost sort — sort three — is much like the second sort. This time, nevertheless, OP_RETURN outputs should be prefaced with the identifier “EP.” This makes them simpler to identify for the payee, however they do price somewhat bit additional in charges for the payer.

Advantages of Bitcoin Accounts

As a Layer 2 proposal, Femenías’ account system wouldn’t require any adjustments to the Bitcoin protocol, nor would it not want industry-wide consensus. Particular person wallets can undertake the proposal tomorrow, and after that customers may use it instantly.

Femenías, in fact, believes this could significantly profit Bitcoin’s usability, opening up an entire new potential for the protocol.

“Of those, non-repudiability is a giant one,” Femenías stated. “Let’s say you go to the Lamborghini vendor to purchase your new journey. When you agree on the value, the vendor exhibits you a QR code and tells you to ship the cost to that deal with. So that you do. However the day after, the vendor’s accountant tells you they’re nonetheless ready for the cost. How do you show you paid? As a result of Bitcoin addresses are pseudonymous, you’ll be able to’t show you despatched the cash to the Lamborghini vendor.”

With Femenías’ account system, this could now not be a threat: The payer may all the time present proof of cost to a selected account. For sort zero funds, that is apparent; the cash was despatched to the account’s publicly seen Worth key. Kind 1 funds are additionally simple to show, because the offered Bitcoin deal with was signed with the payee’s Identification key. However even for Kind 2 and three funds, the payer may show that the payee was actually paid: The one-use non-public key can cryptographically show that the payee has all the data wanted to determine the transaction as his and to compute the non-public key that lets him spend the funds.

One other profit is that Femenías’ account system would make recurring funds far more possible: consider hire, subscriptions, or different periodic transactions to the identical entity. Pockets software program may very well be programmed to simply accept cost requests from a selected account, as much as some most quantity per interval. (For instance, the owner’s account can be allowed to cost as much as zero.1 bitcoin monthly, if that’s the month-to-month hire.)

Additional, it might be a lot simpler for retailers to return funds. This may very well be helpful, for instance, when somebody makes a purchase order, however the service provider later finds that the ordered product is out of inventory. With an account system, the cash could be returned to the shopper simply, while not having to ask for a selected return deal with.

Lastly, Femenías’ account system would, for the primary time, provide Bitcoin customers a blockchain identification.

“This might, for instance, imply that once you login to a web site, you employ your Easypaysy ID, and as an alternative of asking for a password, the web site challenges you to signal a message together with your non-public key,” Femenías instructed. “Even when the web site is hacked, you’re all the time secure as a result of they do not retailer any passwords.”


All that stated, considered one of Femenías’ account system’s strongest options, may be its largest downside: It depends totally on the Bitcoin blockchain by embedding account information in it. Block area is scarce, nevertheless, and scalability is a problem.

To reduce this downside, Femenías in his white paper means that accounts is also opened in bulk: One transaction may embrace a whole bunch and even hundreds of accounts, for as many customers. On this case, the OP_RETURN information would level to an outdoor supply for all of the account information, maybe a web site. The OP_RETURN would additionally embrace a Merkle root for all this account information, so the payer can test the account information towards the Merkle root. Whereas this resolution would depend upon an outdoor supply (like a web site), no less than customers may ensure that the information isn’t tampered with.

An alternate resolution may very well be to make use of a distinct blockchain — corresponding to Litecoin’s — to open accounts. On this case, an index quantity is added to the account referring to Litecoin, or whichever blockchain is used. Whereas this resolution would arguably be safe sufficient within the case of Litecoin, it does, in fact, include the apparent draw back that Bitcoin customers would come to depend on a distinct cryptocurrency, to a sure extent.

For extra info and particulars, see the Easypaysy white paper.

Source link Bitcoin Magazine


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