Blog > Bitcoin & Blockchain Tech

Locked transactions for planning

By Craig Wright | 29 Mar 2019 | Bitcoin & Blockchain Tech

Let’s imagine that Bob wants to ensure that his wealth can go to his children even if something happens. Bob has 50 bitcoin that he has allocated for his child’s college fund. Alice, his daughter, will turn 18 and go to university in 10 years time. He wants to ensure that nothing can stop it, he cannot be pressured into spending money that is put aside for her, and if anything occurs, she will be safe and secure. Bob is in a risky business, and knows that he has put everything into a company that could end up in liquidation, and Bob is guaranteed some of the accounts, meaning that he could be bankrupt if things don’t go as well as he hopes.

He wants to ensure that his daughter is taken care of.

His daughter Alice is set up with a custodian wallet that acts using a threshold key system to ensure the security and availability of keys when Alice turns 18. Bob signs a transaction that is time-blocked using nLockTime to pay to Alice’s address. He doesn’t want her to know about it, and he doesn’t want other people to know either. He knows that people he would deal with would attempt to take the money that he is giving to his daughter. Alice is not of age, and her mother and Bob divorced a few years back. He doesn’t want to give her control of the money either.

Using an on-chain transaction would let Alice’s mother and Bob’s creditors know that he has set the money aside and that he still controls it. But if Bob sets up a transaction that uses a lock time to keep the transaction off the blockchain, he will have managed to construct something that takes the money out of existence and allows it to come back only when Alice is 18.

Legally speaking, he has created a trust that takes control of the money away from himself and gives it to Alice in such a way that she will obtain control when she is 18 — but not before.

Likely, Bob has put his money in bitcoin (BSV) and avoided using the altcoins like BTC (SegWit Core), and can thus do as he wishes as the protocol is stable. He knows that over the next 10 years his transaction will remain valid. He also knows that the altcoins like BTC go through a series of developer changes every 18 months or so, which would require Bob to keep control of the keys in order to keep updating them. Importantly, if Bob has control of the keys, then others can try and take control of the keys from him.

So Bob sets up his system and trust for Alice, and throws away his keys. He knows that Bitcoin is set in stone and in 10 years Alice will be able to run the transaction that gives her access to the money, but nobody else will be able to do so or take the money from her before she turns 18.

The power of Bitcoin

As soon as you allow developers to change the protocol, you give them power over the entire system. You give them power to alter your future. The protocol is set in stone for a reason, and there is a reason that developers want to take control of the protocol and change it. They crave power.