Decentralized Vending Systems Using Bitcoin Lightning Payments and NOSTR Relays

Decentralized Vending Systems Using Bitcoin Lightning Payments and NOSTR Relays

Michael Martin, October 26, 2024

Abstract

This paper introduces a decentralized, privacy-preserving solution for vending and brewing systems, leveraging Bitcoin Lightning Network micropayments (Zaps) and the NOSTR relay protocol. The system powers applications like office coffee brewing, corporate-sponsored lunches, and school meal programs. A key feature is the tip-sharing and commission-based model that allows farmers to receive a portion of the Zaps from the sale of products made from their materials, in addition to their upfront payments. An optional charitable program allocates a percentage of Zaps from high-traffic machines to underserved areas, promoting sustainability and social responsibility across the supply chain.


1. Introduction

In traditional vending and supply chain models, farmers and suppliers typically receive upfront payments for raw materials and no other consideration for use of their raw materials. However, this paper presents a decentralized system using Bitcoin’s Lightning Network and NOSTR relays to add real-time commission payments in the form of tip sharing. This creates an opportunity for farmers and producers to participate in the downstream success of their products, benefiting from real-time micropayments while maintaining their traditional payment models.

The system also supports corporate-sponsored coffee and school meal programs, while offering transparent value flows across the supply chain. Operators are incentivized to restock machines autonomously, turning vending machines into self-sustaining investments for providers. Additionally, farmers supplying materials, such as coffee beans, can receive commission-based tips based on the final product’s sales, fostering a more sustainable business model.


2. Background

2.1 Bitcoin Lightning Network
The Lightning Network enables scalable, low-fee micropayments for instant off-chain transactions. In this system, Zaps are used to pre-fund vending or brewing machines, creating a credit system that consumers or sponsors can draw from. Poon & Dryja (2016) explain how the network facilitates immediate settlement of payments, which is key to real-time commission payouts.

2.2 NOSTR Protocol
The NOSTR protocol provides decentralized, secure communication between users and vending machines. The credit system tracks contributions through public/private key pairs, enabling machines to accumulate and track Zaps. Zyskind et al. (2015) highlight how decentralized systems allow for real-time transactions and secure privacy, essential for tip-sharing models.

2.3 Enhancing the Sustainability Model through Tip Sharing
Instead of solely relying on upfront payments for raw materials, this system introduces tip-sharing or commission-based payments to allow farmers and suppliers to participate in the downstream success of their products. This model benefits suppliers of raw materials, like coffee farmers, by providing them with a commission on the sales of the brewed coffee made from their beans. This complements the traditional supply chain model, enhancing sustainability and incentivizing suppliers to produce high-quality products.


3. System Overview

3.1 Public Key-Based Vending and Brewing Systems with Credit Tracking
Each vending or brewing machine is assigned a public NOSTR key and Lightning wallet address to accumulate Zaps. The system functions as a credit-based vending machine, where consumers or sponsors zap Bitcoin to pre-fund the machine, which draws down the balance as items are purchased. For example, in an office, a company might zap the machine to cover 20 cups of coffee, allowing employees to consume coffee until the balance is used.

3.2 Lock-and-Key Mechanism
The machines use a cryptographic lock-and-key mechanism to control access to goods. Only once the necessary credit or Zaps have been received is the item dispensed. The lock and key feature, based on cryptographic proof, ensures that items are released securely and privately. Li et al. (2017) show how such mechanisms ensure secure access control, which is key to real time vending machine operations.

3.3 Operator Incentives and Self-Sustaining Machines
The system offers Zap splitting where operators receive a portion of the Zaps from each transaction. This allows machines to be self-sustaining, as operators are incentivized to maintain and restock them. For instance, a coffee vending machine in an office setting can autonomously restock through operator intervention, while the provider earns passive revenue from the machine. This setup turns vending machines into passive investments for providers, requiring minimal ongoing management.

3.4 Farmer Tip Sharing and Supply Chain Transparency
In addition to their upfront payments, farmers who supply materials like coffee beans can participate in tip-sharing from the sales of brewed coffee. For example, a coffee farmer in El Salvador who supplies beans to a machine in Phoenix would receive a small commission from each cup of coffee brewed using their beans. This tip-sharing model ensures that farmers benefit not only from the initial sale of their materials but also from the end-to-end value created by their product in real time.

3.5 Charitable Program with Location-Based Zaps
The system allows providers to opt into a charitable program where a percentage of Zaps from high-traffic machines is directed toward lower-income locations. For example, a machine in a busy office could allocate 5% of its total Zaps to fund a school meal program in an underserved community. This feature enables providers to gain social recognition for their contributions while helping those in need.


4. Key Features and Benefits

4.1 Decentralized Payments and Credit Tracking
Using Bitcoin Lightning payments, the system enables credit tracking, where pre-funded amounts are drawn down as items are purchased. This model works well in offices, where a company can zap a machine to pre-fund coffee for employees. The machine tracks the credit and deducts from the balance until it runs out.

4.2 Operator Incentives and Passive Investment
Operators receive a commission on sales through Zap splitting, incentivizing them to maintain and restock machines. This transforms vending machines into self-sustaining investments, with minimal oversight needed from the provider. The system rewards the operator while allowing providers to earn passive income from the machines.

4.3 Tip Sharing for Farmers and Real-Time Micropayments
A major feature of this system is the tip-sharing model, where farmers receive micropayments based on the end product’s sales. Farmers who opt into this system can earn real-time commissions from the sales of brewed coffee made from their beans. This feature enhances sustainability by allowing farmers to benefit directly from the success of their products.

4.4 Charitable Zaps for Underserved Areas
The charitable program enables high-traffic machines to allocate a portion of their Zaps to support lower-income areas. For example, Zaps from a corporate coffee machine could fund meals in a school. Providers can opt into this program to gain social recognition for their charitable contributions, helping to support underserved communities.


5. Use Case Examples

Corporate Coffee Sponsorship with Tip Sharing

In an office, a manager zaps enough Bitcoin to cover 20 cups of coffee. The manager personalizes the zap by including a message to the employees "Great job on the big project this week! -management" . As employees brew their coffee for free, they see the sponsor's message and the machine deducts from the pre-funded credit balance. The operator or person responsible for re-stocking is incentivized to keep the machine stocked, receiving a portion of the Zaps for each cup. Additionally, the coffee farmer who supplied the beans receives real-time commissions through the tip-sharing model, rewarding them for the product's downstream success.

School Lunch Sponsorship and Charitable Zaps

An anonymous donor zaps a vending machine in a low-income school to cover 50 meals. The machine dispenses meals to students as needed, deducting from the pre-funded balance. A corporate machine in a busy office contributes 5% of its Zaps to the school’s machine, helping ensure that the students continue to receive meals.

Farmer-Commissions in Coffee Supply Chain

A coffee farmer in El Salvador supplies beans to a machine in Phoenix. As consumers purchase coffee, a portion of the Zaps goes directly to the farmer, providing real-time commissions in addition to the upfront payment. This allows the farmer to benefit from the complete value chain of their product.


6. Conclusion

This decentralized vending system leverages Bitcoin Lightning payments, NOSTR relays, and a tip-sharing model that allows for real time anonymous digital payments and enhances supply chain sustainability. Farmers and suppliers receive real-time commissions on top of their upfront payments, while operators are incentivized to maintain machines autonomously, turning them into self-sustaining passive investments. Providers can also opt into charitable programs, using a percentage of their Zaps to support underserved areas. Consumers of a vended good, such as coffee, can opt into to a tip system that has the potential to tip the entire supply chain, including the famer who produced the beans. This solution creates transparency, fairness, and sustainability across the entire supply chain.


7. References

  1. Antonopoulos, A. M. (2017). Mastering Bitcoin: Unlocking Digital Cryptocurrencies.
  2. Poon, J., & Dryja, T. (2016). The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments.
  3. Li, Y., He, Y., & Chen, C. (2017). Design and Implementation of a Smart Lock System Based on BLE and Passwords.
  4. Zyskind, G., Nathan, O., & Pentland, A. (2015). Decentralizing Privacy: Using Blockchain to Protect Personal Data.
  5. Mamun, K., & Sengupta, R. (2019). IoT-Based Smart Vending Machines.
  6. Breslow, J. (2018). Bitcoin and Vending Machines: A New Way to Pay.
  7. Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System.
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