TL;DR: Former BitPay developer Jason Dreyzehner announced CashChannels, which he claims is “a noncustodial, privacy-preserving, flexibly-denominated recurring payments” wallet tool built on the Bitcoin Cash (BCH) network. Recurring payments have bedeviled the crypto world for a while, and the potential of solving its riddle has giant implications for merchant adoption.
CashChannels for Recurring Payments
CashChannels is something like a dynamic, noncustodial wallet tool, and uses a single-key for users’ future payments preauthorization. Set amounts, times, channel and payment ID information, and maximum satoshi values are part of each authorization. It doesn’t hold a balance to preauthorize, as with standard debit cards — funds just need to be available when the payment happens. The tool is also not cryptocurrency specific, as payment amounts are determined by a Rate Oracle, and so any digital asset can be used.
Jason Dreyzehner is well known in the BCH developer community, and can be found in protocol development meetings leading to the recent upgrade, representing Bitauth, an identity and message authentication standard using bitcoin authentication. Building on at least some of that work, along with his experience at crypto payment processor giant BitPay, Dreyzehner recently revealed how he might have struck upon solving a holy grail problem for the ecosystem, recurring payments.
CashChannels, he explained, “let users pre-approve future transactions, valued in any currency, to another person or company. Once the spender has authorized a payment – and the specified time has passed – the receiver can create the transaction without the spender having to open their wallet. CashChannels automatically ensure the payment is correct, and spenders have full control over their money at all times.”
Possible, but Clunky
Early response from parts of the crypto community familiar with the issue were filled with effusive praise. “Yet another groundbreaking solution on #BitcoinCash,” CoinText CEO Vin Armani lauded, “to a problem that has bedeviled Bitcoin since it’s inception: recurring payments (subscriptions). Excellent work from @bitjson! Also nice to see that, with some work, we can support SLP.”
The Simple Ledger Protocol (SLP) token ecosystem is BCH’s user-friendly, less expensive answer to the industry standard ERC20 universe from Ethereum. Dreyzehner noted how due to SLP requiring “the first output of a transaction to be the OP_RETURN SLP message, this template currently can’t be used in an SLP transaction.” Alluding to Armani’s hope, however, he did concede “it’s possible to modify this template to support reading the channel output from another index by reading the BitcoinVarInt of each output, converting them to Script Numbers with bitwise math, and stepping through to validate the output at a certain index. To use CashChannels to preauthorize an actual SLP transfer, it will also be necessary to perform some additional validation on the SLP message,” Dreyzehner also stressed.
He’s careful to label CashChannels as a “first draft.” And though recurring payments have been technically possible with bitcoin, they’re cumbersome at best. They require a kind of pre-singing transactions for a future time, but only when coins exist in the wallet and are essentially frozen, and can be made exclusively through only one type of coin.
For a “$10/month subscription,” Dreyzehner detailed further, “the spender would need $60 worth of bitcoin to pre-sign 6 months of subscription payments (and they can’t move the $60). If the market value of bitcoin fell, the user would need to re-sign each transaction to increase the payment. If the value of bitcoin rose, the user’s wallet would need to move the funds to invalidate the previously signed transactions, then it would need to re-sign new transactions with a smaller payment amount. This technique almost always requires user interaction before a payment processes, so these kinds of pre-signed transactions have never really been useful or common.”
CashChannels potentially allows much more flexibility with recurring payments. Senders authorize through a formatted message, and the receiver holds it until the agreed-upon date. The receiver can then use that message authorization to create a transaction from the channel.
Developer Gabriel Cardona also praised Dreyzehner’s work, calling him “a true #BlockStar! Great work, as always. Love the Name CashChannels BTW.” Karol Trzeszczkowski took the opportunity to compare the development to his earlier work. “It might be worth mentioning that CashChannels are a big improvement over the existing solution for recurring payments solution I made – namely more precise denomination in fiat currency that was clunky with Mecenas.”
Dreyzehner agreed, “Yep! CashChannels use some great ideas from @KTrzeszczkowski
‘s Mecenas (https://github.com/KarolTrzeszczkowski/Mecenas-recurring-payment-EC-plugin) and @TobiasRuck’s http://be.cash. CashChannels [added] a ‘rate oracle’ for specifying payments in any currency, and every payment must be explicitly pre-authorized by the user.” He’s also soliciting help on the project, asking for improvement suggestions and to team with enterprising wallets.
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DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.