CommerceBlock recently launched Mercury, a StateChain for transferring ownership of Bitcoin without touching the Bitcoin blockchain.
The method opens up further use cases for the cryptocurrency so we caught up with the CEO Nick Gregory to find out more.
‘The concept is simple really, instead of committing transactions to the Bitcoin blockchain, you are simply giving your bitcoin private key away. It’s how to manage that in a trustless way that has been the challenge. Some serious math sits behind the method in order to stop collusion.’
Mercury draws on the open source protocol Lindell’s 2-party ECDSA Library, and as the name suggests, transferring private keys requires a two party multisig. The design of Mercury ensures that collusion between either party and the intermediary is mitigated. It also ensures that once the private key has been transferred, the sender is no longer be able to know or use it to access the Bitcoin.
‘Mercury is primarily suited to transferring large amount of Bitcoin between parties, because the amount held on the private key cannot be split up. This means that it will have utility for example, in the case of exchange to exchange settlements.’
There is also further utility in cases where there is no liquidity to service a trade and also potentially in the case of transferring the ownership of smart contracts from person to person. Developments such as StateChains and other layer two protocols such as Side Chains and Payment Channels are usually welcomed by the mining community as Nick explained, though the transaction fees are sidelined, miners want more uses for Bitcoin.
Mercury fits neatly into the scaling debate. As the transaction fees grow on the Bitcoin network, currently sitting around $2 at the time of writing, off chain solutions are likely attract more attention. Lightning, that is focussed on P2P micropayments is at opposite ends of the spectrum to Mercury, but as Nick pointed out, the two could in fact work together, though the technical solution for that does not yet exist.