Simple Ledger Postage Protocol: Enabling A True SLP Token Ecosystem On Bitcoin Cash
Tl;dr: The Simple Ledger Postage Protocol allows SLP token wallets to no longer have to use BCH as “gas.” Such wallets no longer must receive, hold, or send native BCH. Instead, they can, effectively, pay miner fees using the SLP token itself. This allows for a “pure token” user experience not available with even the most popular token standards, including Ethereum’s ERC-20.
By far the most popular crypto-token standard is Ethereum’s ERC-20. A glance at a list of the most popular Ethereum ERC-20 tokens reveals coins like Binance’s BNB and Bitfinex’s LEO. A majority of the top stablecoins, including Tether (USDT), Circle’s USDC, Paxos, and DAI, all run on Ethereum as ERC-20 compliant tokens. The 2017 ICO craze was almost completely fueled by ERC-20 tokens. Clearly, this incredibly popular token standard offers utility to those seeking to store and transfer value on a public blockchain. For all of its utility, ERC-20 has a major Achilles’ heel when it comes to user experience (UX): in order to send an ERC-20 token, a user has to also be in possession of Ethereum’s native token, ETH, and must send a bit of ETH as “gas” to incentivize nodes to execute the smart contract which the token represents.
If you want to send USDC to a friend, not only will you have to be in possession of enough ETH to pay for gas, but your friend will, similarly, need to be in possession of ETH to have any hope of spending the USDC she was just sent. If your friend just began a fresh wallet and you send her $100 in USDC, those funds are essentially “stuck” in her wallet until she can get some ETH into her wallet as well. This “dual currency” requirement has been a thorn in the side of Ethereum developers for years. I saw this UX nightmare hamstring Swarm City, a project that I believed had a great team and a bright future. The Swarm City developers were the first team I saw trying to tackle the “additional gas” problem. They came up with a system of chained smart contracts that they called “The Gas Station Protocol.” More recently, similar proposals have arisen as ERC-865 and EIP-965. These solutions are quite complex and, to date, do not seem to be attracting significant interest from the overall community.
The Simple Ledger Protocol (SLP) token standard on Bitcoin Cash has seen impressive growth of adoption since its release. Multiple exchanges, including CoinEx, Cryptophyl and the new Bitcoin.com Exchange have begun supporting the tokens. SLP tokens are easy to create and transactions with the tokens (BCH transactions) are cheap, fast, and reliable. Until now, however, SLP tokens have been saddled with the same user experience issue that has plagued ERC-20 tokens. In order to move SLP tokens, a user needs to have a small amount of additional BCH available to their wallet to pay miner fees. It’s the “gas” problem all over again. At least that was the case until the publication of the Simple Ledger Postage Protocol as an official SLP specification.
The stated purpose of the new protocol specification is:
“…[For] the sender of SLP tokens to effectuate a transaction without the need for additional native Bitcoin Cash (BCH) inputs to cover output balance and/or miner fees. Use of this protocol enables wallets to exclusively support SLP tokens without also, simultaneously, having to act as a wallet for native BCH.”
In essence, the Postage Protocol allows users to pay for their miner fees using the SLP token itself. This is accomplished through the use of an intermediary server called a “post office.” The user sends the post office the requisite value of the needed BCH as an additional output in a transaction. Upon receiving and validating the otherwise invalid transaction, the post office attaches additional input containing native BCH (“stamps”) and then broadcasts the “postage paid” (valid) transaction to the network. This is accomplished leveraging fundamental Bitcoin transaction capabilities along with functionality already used with BIP-70 and the Simple Ledger Payment Protocol. In fact, existing BIP-70 servers and supporting merchants can provide postage services for buyers. The goal is to see a competitive marketplace with post offices supporting all major SLP tokens and working to provide the lowest price and highest quality for postage services.
Wallets utilizing the Simple Ledger Postage Protocol are able to have a UX where the native BCH token need not even be recognized. This means that token creators and supporters can finally treat their own token as a first class citizen, with a user experience that mirrors the experience that can already be had with Bitcoin Cash when using BCH. Stablecoins, utility coins, and rewards points can all be used in standalone wallets, without the user ever needing to even know that they are transacting on a Bitcoin network at all. Their wallet need never receive, hold, or send native BCH. This ability enables the SLP user experience to be far superior to the experience with ERC-20 and can enable an entirely new type of innovation in the token space.
Watch Simple Ledger Payment Protocol in action with Badger Wallet and HonestCoin:
CoinText is offering the first post office. It is currently live and supports HonestCoin (USDH), Spice Token (SPICE) and Anypay Gold (GOLD). Wallet developers interested in integrating their wallets with this post office, please e-mail contact@cointext.io
