Settling offline transactions


Use Case

My use case is around a scenario where both customer and merchant possess offline wallets with a balance that has had confirmation on the blockchain.

  1. To begin with, let us say that, the merchant and the buyer’s wallets show balances of 20 BTC and 10 BTC respectively. These balances are the one that are confirmed on the block-chain.
  2. Then, let there be multiple transactions between the merchant and buyer such that the balance is always updated locally in the wallets only.
  3. All of the transactions, in 2 above, happen in an offline mode; i.e. no access to network. The period of no access can run into days.
  4. Sometime, in the future, when either/both of the wallets are online, all the offline transactions are published to blockchain and are confirmed.

Blockchain Sync

There are two things that can happen at this point.

First, the wallets are so secure that, all updates (credits and debits) happen locally without ever having to ‘sync’ up with the blockchain. The only time the wallets may sync with blockchain is to post the transactions and their sequence. And, this may happen only if there is enough regulatory pressure.

Second, all credit updates are made to the wallets via the blockchain. This requirement is enough motivation to seek network connectivity; even if it is once in a week or fewer.

Question

In either case, we are looking at a scenario, where a value, confirmed by blockchain, is used in transactions offline to be confirmed online later. How do we implement this?

Analogy

Bus conductors may issue tickets with an offline machine to passengers who board the bus at various points throughout the journey. When the bus reaches its destination, the machine is used at the depot to arrive at a list of tickets sold and the amount collected thereof. Thus, this is an example of an offline transaction where transactions are ‘settled’ when ‘connectivity’ is eventually available.

Spawned off of: http://bitcoin.stackexchange.com/a/41356/6975

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Bitfinex Interim Update: Plans to compensate users and settling of balances/positions.

Interim Announcement
August 6, 2016

Following the theft on August 2nd, the Bitfinex team has been working tirelessly towards bringing the platform back online in a secure and controlled manner. We have finalized the accounting of losses incurred and are currently coordinating strategic plans for compensating customers.

We intend to come online within 24-48 hours with limited platform functionality. Additional announcements will be made as we progressively enable more platform features and return to full operations. We appreciate that our customers and the public want this handled quickly, but it needs to be done a way in which all assets are secure and immune from vulnerabilities. Every resource is being leveraged to make that happen in a safe and optimal way.

As disclosed in earlier announcements, all withdrawals, open orders, and open funding offers have been cancelled and all financed positions have been settled. Exact settlement prices were published on August 3rd.

After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses.

We are actively discussing various strategic options with numerous potential investors as part of our strategy to fully compensate our customers. Such discussions, however, are in early stages and will likely take time to play out. In the meantime, In place of the loss in each wallet, we are crediting a token labeled BFX to record each customer’s discrete losses. Tokens will be distributed without release or waiver. The BFX tokens will remain outstanding until redeemed in full by Bitfinex or possibly exchanged—upon the creditor’s request and Bitfinex’s acceptance—for shares of iFinex Inc. We are still sorting out many details on this; we will post further updates in the coming days.

Thank you for your continued patience and for the many generous offers of support that we have received over the last several days. Notwithstanding this attack, we continue to believe in the possibilities associated with bitcoin. We will continue to update our customers and the public as and when we can.

Edit: One thing that I need to clarify is that bitcoin deposited after the hack was discovered is not subject to the loss. I'm waiting to hear back on the cutoff point.

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