The Bitcoin Cheque is a new open source project that aims to solve many of the limitation Bitcoin is facing. In particular it may be a solution for the limitation of the 1 Mb Blockchain size and transaction speed.
There has been a lot of debate in the Bitcoin community whatever to implement Segregated Witness and increase the Blockchain size. Both proposals has its pros and cons, hand it may be hard to forecast the consequences.
The main problems these two proposals aims to solve is the now congestion in getting a transaction into Blockchain and confirmed. Due to the Blockchain limit of 1 Mb, approximately 12.000 transaction can be confirmed in an hour. Obviously this is not a very large number compared to VISA handling 2000 transaction each second. This limit has both lead to higher fees and long queues of transaction waiting to get processed.
The Segregated Witness is a proposed solution that will put some the scripts, that are not stored in the Blockchain, in an extended Blockchain. The SegWit will also be a prerequisite for the Lightning Network, which aims to provide instant payments. So SegWit claims to solve two of the major issues with Bitcoin, however it is widely debated if the SegWith will really work well.
There is a third solution that can aim to the limitation of Bitcoin. The Bitcoin Cheque is a payment solution that runs outside of the Blockchain. The Bitcoin Cheque itself is only a file promise that its issuer will pay a certain amount to its holder. Typical the cheque will be issued by banks upon requested by a bank user. The cheque can be used to transfer money or as payment by sending the cheque to a receiver.
The usage of Bitcoin Cheques will in principality function in the same was as traditional banks do today. For a user to send a Bitcoin Cheque, he will first have to deposit some Bitcoins to his bank account. Once he wants to make a payment, he will request his bank to issue a cheque with the desired amount. The amount in his bank account will then be put in an escrow account.
Since the cheque is transferred in the same way as sending a file over the Internet, there is no need to wait for a number of confirmations on Blockchain. The payment will therefor happen instantaneously. Of course the cheque itself does not hold any Bitcoins in itself, as it is only a promise. The actual Bitcoin transaction has to take place after the cheque has been transferred. After the cheque has been received, the receiver can request the money to be transferred to his valet. But as long as the receiver trust the issuing bank, this will not be a problem.
Payments with Bitcoin Cheque also allow several payments to be bundled into one Bitcoin Blockchain transaction. For merchant receiving a very high number of payments form many customers, some of these customer will likely be using the same bank. The cheques from these payments, can be bundled into one transaction. The Blockchain transaction fee can then be split on may cheques, which will reduce the fees on each of them.
Also, the merchant don’t need to request the money to be transferred to his personal valet. It is also possible to request the money to be transferred to his personal bank account. And if several merchants are using the same bank, payments from several different customers of one bank paying to several merchants, can be bundled into one Blockchain transaction, reducing the total fees and Blockchain load further. This way the banks will function as clearing houses.
The Bitcoin Cheque project aims to draft open specification for the cheque file and the protocols needed. The goal is to create a flexible building blocks that can easily be used by developers.