[Bitcoin-development] An idea for alternative payment scheme

[Adam Back]

Seems like you (Nadav) are the third person to reinvent this idea so far :)

I wrote up some of the post-Bytecoin variants here:

https://bitcointalk.org/index.php?topic=317835.msg4103530#msg4103530

The general limitation so far is its not SPV compatible, so the recipient
has to test each payment to see if its one he can compute the private key
for.  Or the sender has to send the recipient out of band the derivation
key.

However at present most of the bitcoin infrastructure is using the bitcoin
broadcast channel as the communication channel, which also supports payer
and payee not being simultaneously online.  You have to be careful also not
to lose the key.  You dont want a subsequent payer data loss event to lose
money for the recipient.  You want the message to be sent atomically.

It does seem like a very attractive proposition to be able to fix the
address reuse issue.  Admonishment to not reuse addresses doesnt seem to
have been successful so far, and there are multiple widely used wallets that
reuse addresses (probably in part because they didnt implement HD wallets
and so are scared of losing addresses due to backup failure risks of non HD
wallets and fresh addresses).

Adam

On Fri, Jan 03, 2014 at 10:30:38AM -0800, Gregory Maxwell wrote:
>On Fri, Jan 3, 2014 at 10:00 AM, Nadav Ivgi <nadav at shesek.info> wrote:
>> I had an idea for a payment scheme that uses key derivation, but instead of
>> the payee deriving the addresses, the payer would do it.
>>
>> It would work like that:
>>
>> The payee publishes his master public key
>> The payer generates a random "receipt number" (say, 25 random bytes)
>> The payer derives an address from the master public key using the receipt
>> number and pays to it
>> The payer sends the receipt to the payee
>> The payee derives a private key with that receipt and adds it to his wallet
>
>Allow me to introduce an even more wild idea.
>
>The payee publishes two public keys PP  PP2.
>
>The payer picks the first k value he intends to use in his signatures.
>
>The payer multiplies PP2*k = n.
>
>The payer pays to pubkey PP+n  with r in his first signature, or if
>none of the txins are ECDSA signed, in an OP_RETURN additional output.
>
>The payer advises the payee that PP+(pp2_secret*r) is something he can
>redeem. But this is technically optional because the payee can simply
>inspect every transaction to check for this condition.
>
>This is a (subset) of a scheme by Bytecoin published a long time ago
>on Bitcoin talk.
>
>It has the advantage that if payer drops his computer down a well
>after making the payment the funds are not lost, and yet it is still
>completely confidential.
>
>(The downside is particular way I've specified this breaks using
>deterministic DSA unless you use the OP_RETURN, ... it could instead
>be done by using one of the signature pubkeys, but the pubkeys may
>only exist in the prior txin, which kinda stinks. Also the private
>keys for the pubkeys may only exist in some external hardware, where a
>OP_RETURN nonce could be produced when signing).
>
>These schemes have an advantage over the plain payment protocol
>intended use (where you can just give them their receipt number, or
>just the whole key) in that they allow the first round of
>communication to be broadcast (e.g. payee announced to EVERYONE that
>he's accepting payments) while preserving privacy.
>
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