Knuth Release — Integrating New Payment Technology

The Purpose

The Technology

  • An Ethereum account opens a payment channel with another Ethereum account. The payment channel is unidirectional, which means only the account that opened the channel (i.e., the sender) can send tokens to the other address (i.e., the receiver).
  • The sender tops up the payment channel with a number of tokens of his choosing. The sender can then perform fee-less transactions until the chosen number of tokens is exhausted.
  • When the sender wants to perform a transaction, he produces a cryptographically-signed balance proof. This proof is sent to the receiver, which confirms its validity. If the balance proof is valid, this means the transaction was successful. Then, the tokens involved in the transaction are allocated to the receiver.
  • Both the sender and the receiver can close an open channel at any time, provided they possess the valid balance proofs. When a channel is closed, the receiver gets the tokens allocated to him and the sender gets back the tokens he didn’t spend.

The PoC

  • The user is using an app with the AppCoins SDK integrated. Once the user wants to buy an in-app item and clicks on it, the AppCoins Wallet is triggered and shows the payment dialog.
  • The payment dialog will state if there’s an open payment channel or not. If there’s already an open channel, the user can confirm the payment, and it will be done using the APPC in the channel. The transaction will be instantaneous and fee-less.
  • If there isn’t already an open channel, the user will be able to open one and top it up with a certain amount of APPC. Then, the payment is done already using the payment channel.
  • If the user already has an open channel and still has enough APPC for a certain payment, that payment channel will be used to buy the item. However, if the channel doesn’t have enough funds, the user needs to head out to the wallet and close the channel explicitly.
  • At any time, if the user has an open payment channel, it can be closed in the AppCoins Wallet, and the unused APPC are sent back to the user’s account.
IAP flow using the AppCoins Wallet with Payment Channels
(Left) Opening a payment channel; (Left) Doing a transaction within a payment channel

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