3.5 Bitcoin use cases Flashcards
MultiSig Address:
A N/M multisig address is an address which has following properties:
It requires …
N defines the number of …; M defines the number of maximum signatures
A 2/3 multisig address requires …
more than one signature; required signatures
two arbitrary signatures from a pool of three predefined signatures.
Explain how the escrow is removed from the picture when it comes to enabling secure transactions.
See slides 28.
Alice wants to continuously use a service from Bob and pay a certain small amount of Bitcoin for each usage.
Creating new transactions every time won’t work as:
…
An approach would be following:
At the beginning, Alice send her … to a 2/2 multisig address.
Every time she consumes the service by Bob she signs a transaction locally for the multisig address, sending the accumulated amount to Bob and the change to herself. A message containing this incomplete transaction is sent to Bob.
If she is done using the service, Bob will sign the last transaction he received and publish it on the network.
What’s the problem here? Propose a solution.
- Too many transactions get created
- The fees for the transactions would be too high
maximum spendable amount;
check slide 30 for further information.
Scaling bitcoin
Micropayments is a concept used by … that allow users to make Bitcoin transactions without …
Payment channels operate outside the chain and only two transactions are required to be recorded on the chain. What are they?
By doing so, payment channels enable …, hence scaling the Bitcoin network
payment channels
committing every transaction to the main network
the initial transaction that opens the channel and the final transaction that closes it. Every transaction in between is executed outside the chain.
exchanging Bitcoins in a more efficient and cost-saving way
Explain the concept of “Layer-2-Solutions” giving the most common example.
Lightning Network is the most well-known solution on Bitcoin.
Layer-2-Solutions -> payment channels that help scale the main underlying network by handling some of the workload on a separate network built on top.
