What is a Proxy Resignature? A tool to build an on-chain credit reputation
For example, Alice wishes to make a payment to Bob from her Pledge contract where she is contracted to make 2 payments over 2 blocks. In order to maintain a perfect credit score, Alice must make all her payments in each block or she will be in default for her scheduled payments. Alice make a successful payment in Block 1. However, Alice is unable to make her required payment in Block 2 because she is short of the required funds.
The Promise Protocol solves Alice’s problem by using a proxy re-signature scheme as defined by Ateniese and Hohenberger. In proxy re-signatures, multiple signatures, can coexist from distinct parties on the same message and be publicly verified as distinct signatures. A proxy in possession of a shared portion of valid public signature can complete a signature by “re-signing” a message with its share but cannot, on its own, generate signatures for either party. The proxy “translates” (re-signs) a valid public signature from one party a valid public signature from another party on the same message.
Alice has a customer Janet. Janet owes Alice a payment from goods already delivered and will have funds in Block 2. Alice needs to make her payment in Block and on time. Alice delegates Janet as a proxy to resign a payment from Janet to Bob, as Alice. Alice will delegate her proxy Janet to re-sign a transaction in only one direction: To Bob’s public key in the Promise Pledge transaction.
Bob receives his payment from Alice's proxy re-signed signature that Janet re-signed as Alice. Alice retains her credit reputation with Bob. Janet has made a successful payment to Alice. Bob is confident he can extend more credit to Alice.
Proxy Re-signature Use Cases for Business.
Prox Re-signatures opens up the world of automated 3rd party payment processing to the Blockchain. Below are some examples of how this cryptography may be used in business payments.
Loans and Business Credit: Credit is a measure of willingness and ability to repay. Proxy re-signatures lower the costs to repaying promissory note and credit commitments by allowing more than one party to contribute to a repayment while building credit for the borrowing party.
Payment Gifts and Charitable Giving: Gifts and charitable giving benefit from proxy re-signatures when benefactors wish to maintain anonoymity and make payments either as the charity or an organization making payments on behalf of a charity.
Emergency Cash Flow: When businesses struggle through a cash flow crunch, enabling proxy re-signatures now allow emergency funds to be routed, via proxy, as the the business that is making the payment.
Authorized Payments: Proxy Re-signatures allow for payment flow control so that only authorized members may prox re-sign a transaction. This is important for compliance and repayment control.
Credit Reputation Building and Authentication: Building credit reputation is about completing contractual obligations within the contract terms. Re-signatures make it easier for parties to adhere to contrat terms in the face of difficulties.
Automated Blockchain Payments: Proxy re-signatures can be automated by partners that will fill cash flow needs, for service fees so that payments continue interrupted. This may also be considered a type of insurance against non-payment.
3rd Party Payment Processing (replacing Debit Cards and Credit Cards): Payment processing companies currently act as proxies for business payments and consumer payments. Proxy re-signatures now allow decentralized and automated payment processing.