4.4. Peer-to-peer batching
Transaction batching procedures are possible under UTXO-based models and are a prevalent practice in the Bitcoin ecosystem (9). Several blockchain analyses highlight how beneficial it is for service providers to batch payments and how these procedures also have positive externalities on the entire network, lightening the blockchain’s load.
In the Bitcoin ecosystem, several big companies were late in introducing batching procedures due to the technical complexities required to aggregate transactions manually. For this reason, designing applications that assist users with this task is preferable.
That is why a Sequentia wallet should include two different tools to incentivize the use of batching:
- 1.A dedicated user interface that services/businesses like exchanges can use to perform large-scale transaction batching (of any RAS token).
- 2.A peer-to-peer batching feature inspired by a typical Bitcoin coinjoin (10), where users can send one or multiple tokens to one or several destination addresses, all while combining the transaction with those of other users. Unlike a typical coinjoin, batching on Sequentia extends to every transaction type, not only payments of the same amount
Users can ask peers to aggregate payments in a single transaction, extending batching procedures to every user, not only services and exchanges that process many payments simultaneously. Users can aggregate transactions made in different RAS tokens and use signature aggregation to reduce the size of each payment.
Any type of user may be interested in batching for privacy reasons since payment aggregation mixes inputs and outputs, making blockchain analysis much more challenging. In any case, the most significant incentive to batch transactions is the resulting lower fees. Tests on the Bitcoin network reveal that a percentage decrease in the load of the blockchain may lead to an even greater decrease in the fee rate (11), even considering that Bitcoin Schnorr signature aggregation is not yet implemented (which would bring even more savings, up to 70% per payment).
9. In March 2018, an analysis by Nic Carter and @hasufl (https://coinmetrics.io/batching and https://txstats.com/dashboard/db/batching?orgId=1) reported that between 40% to 60% of the volumes transferred are in batched transactions, accounting for 40% of the total output moved on the blockchain. A similar analysis made by Sequentia research (August 2020) has been made on a sample of almost 1 million transactions (932.278) taken from 3 different months (August, July, June 2020). In terms of outputs, the results closely match the previously mentioned research (42% of all outputs are batched), whereas the sample shows 33% of the volumes batched.10. For example, Wasabi wallet implements the function of transaction coinjoin, which batch payments of the same amount so that the blockchain analysis cannot individuate the sender and receiver’s addresses.11. When Coinbase introduced batching in March 2020, their load on the Bitcoin network was reduced by “more than 50%”, as reported by Eli Haims, Coinbase product manager. That 50% saving in space led to an actual 75.2% saving in fees (https://blog.coinbase.com/coinbase-rolls-out-bitcoin-transaction-batching-5f6d09b8b045 https://www.cryptoglobe.com/latest/2020/08/coinbase-saved-its-clients-75-in-fees-by-batching-bitcoin-transactions).