This is fantastic, I can't wait to see who emerges as the first lightning network payment channel provider. This helps alleviate fundamental issues with the current implementation of Bitcoin without the need for a hardfork, and could even be a solution to the wallet identification issue if the payment channel provider acts as domain name registry. ie instead of accepting transactions to an ugly string I could accept transactions to ntq.blockchain.info.
I prob. missing something about [you're] "handing me your private keys to unlock that 1c output. Now if you ever released Transaction 1, I can spend both the outputs". What happens if you release transaction 1, then immediately release a transaction moving the funds away from that address? Seems like I have to be very vigilant and closely monitor the blockchain, fearing this will happen?
Is the purpose of this to lower the amount of transactions heading towards the blockchain ?
For example part 1 looks like a way to do recurring payments where the receiving party is guaranteed to get their money but they don't need to broadcast a transaction for each payment received.
That's a side effect, but it's more about being able to share control over the funds with the other party without fully committing them.
Then they can let you instantly spend them on things.
There is substantial complexity, and they would have to monitor all the addresses used to make sure that you don't try to commit an early transaction to the blockchain and bounce the funds out of the shared address.
Anyone offering blockchain services should anyway have automatic processes making sure that the blockchain records of their active addresses correspond to their internal accounting, but it is repeatedly the case that these operations don't even do internal accounting.
