Friday, February 3, 2023

GAP600 Using Data Science to Instantly Confirm Bitcoin Transactions

GAP600 Using Data Science to Instantly Confirm Bitcoin Transactions

While second layer solutions designed to speed up Bitcoin transactions are getting all the attention lately, one firm is dedicated to making on-chain commerce as fast as possible. GAP600 says its intelligent engine can accurately assess risk in real time and instantly confirm transactions without waiting.

Also read: Chinese ICOs Going P2P as Crypto Investors Find New Ways to Trade

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GAP600 is based in Tel Aviv, with a distributed team in several countries. Since August last year it has processed over 1.3 million transactions for a dozen real clients — and now regularly hits 200,000 a month.

Trying to Solve the Biggest Problem for Bitcoin-Accepting Merchants

The most common response to any story about merchants accepting bitcoin is “do you have to wait for six confirmations?” In a busy retail or hospitality setting, that’s completely impractical — even under perfect network conditions, that could be an hour.

GAP600 logoGAP600 uses data analytics to calculate the risk of a double-spend. In doing so, it says it can confirm transactions instantly, rather than waiting long periods for an initial or subsequent confirmation.

The two largest physical retailers to accept bitcoin are Japan’s Bic Camera and Marui department stores. Bic Camera allowed no-confirmation payments, and customers could use any wallet. However, for Marui’s trial, customers must pay with the bitFlyer app. BitFlyer is handling any double-spend issues.

How GAP600 Calculates Double-Spend Risk

Bitsonline spoke to founder and CEO Daniel Lipshitz — originally from South Africa, he has a background in security and finance, and worked for a time at Deloitte.

GAP600 CEO Daniel Lipshitz
GAP600 CEO Daniel Lipshitz

Lipshitz sees the target market for GAP600’s services as mainly exchanges and payment processors, who he called “the real integrators” for Bitcoin. However his company would also benefit gambling and gaming sites and ATM operators — anyone who could serve their own customers better with faster transactions.

GAP600’s algorithm gives a “score” to each transaction it curates, in real-time. The algorithm doesn’t assess the risk of each individual sending address — which would be impossible anyway. Instead, it looks at the network itself, examining different characteristics of transactions that either confirm or don’t.

“There’s primarily two aspects to it,” Lipshitz said. “There’s the static information that’s published with each transaction, and then there’s the propagation aspect of it — how’s the transaction being propagated across the network, is there anything strange happening on that level?”

“That’s the broad description. On top of that, we use data science models, machine-learning models… some of the others we use are gradient boosting-based models, etc. We’re constantly creating and adding new indicators and fields into this algorithm that learns and adjusts aspects of whether to confirm or not confirm. Then there’s managing risk appetite, false positives, it’s constant research and development putting that forward.”

Guaranteeing the Algorithm’s Decisions

GAP600 backs up its engine’s decisions with a financial guarantee. The double-spend risk is real, and Lipshitz said the company paid out about seven times — mostly in the early days.

Bitcoin blocks“Each time, we had to tweak certain aspects of the algorithm, or the network propagation platform we use, in order to assess double-spend attempts.”

The double-spend transaction attempts were around $1,200 on average, and tended to come in batches — two here, four or five at once another time, etc.

The company has an underwritten insurance policy from a “U.S. based A+ rated insurance company” in case of financial loss from an algorithm failure or hack.

GAP600 was initially self-funded and is still bootstrapped, but is now cashflow-positive. The company is “very lean, but looking to grow”.

What About Lightning Network, Payment Layers and Other Speed Improvements?

But how much demand will there be for GAP600’s services in a world of Lightning Networks and payment layers?

There will always be a significant number of on-chain transactions, Lipshitz said.

“As for payment layers, we obviously don’t have anything to add value there. Our value is on-chain transactions, with timing in the seconds — things like Lightning Network will function in parallel.”

GAP600 sees itself saving clients around 8-12 minutes per transaction; the median time in August 2017 was 20 minutes faster than a regular on-chain transaction.

50 percent of the transactions they confirmed instantly took over 15 minutes to get a single confirmation, Lipshitz said.

However he and his team noted much of the network congestion has vanished since the 1st August hard fork. The technical and political activity surrounding it was “very funny to watch.”

“Things have definitely gotten better, the network completely calmed down. It’d be very interesting to know what was going on there. I don’t know … it’s quite strange that it’s completely fallen off.”

Do you see a benefit to services like this? Let’s hear your thoughts.

Images via GAP600, Pixabay

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