D.T.P is a way to make off-chain transactions over Coco. It significantly reduces the transactions fees to the point where microtransactions are possible. It even helps you to save on your sale tax for IRS.
To understand how it works let’s start with the basic concept of trust in Coco.
Users in Coco can entrust their wallet to other users by sending a Trust-Transaction from wallet A to wallet B. The owner of wallet B can now perform transactions on behalf of wallet A. However wallet B does not get wallets A private key. Also wallet A owner can rework wallet B owner access to his wallet by sending a termination transaction.
To better understand this idea, let’s see examples of its implementation.
Let’s assume that V is a major credit card company that wants to form D.T.P, for simplicity lets keep calling it V. V share it’s Coco wallet with its users and allow them to entrust V with their wallets. From this point, users will make their transactions using V. However V will not instantly perform a transaction over the blockchain, it will aggregate all the transactions and after some time perform an update transaction over the blockchain.
Update transaction is a special protocol created especially and exclusively for D.T.Ps. When making an update transaction only the final balance of the wallets is revealed, the information of whom you sent the money to or whom you got it from is not saved to the blockchain. It makes the transaction small, very efficient and adds extra privacy for users.
Coco wallet application can contain multiple wallets. For each of your wallets, you can choose to connect it to a D.T.P. Once connected, all the transactions will be made automatically via the D.T.P. It also possible to disconnect from the D.T.P, but it’s not happening instantly, you must turn on the disconnect button, and after transactions were committed to the blockchain you will be disconnected. This to prevent double spending.
This wallet functionality is part of Coco protocol itself, and it hides yet another great benefit of D.T.P.
From the moment you hit the disconnect button a transaction will be made, and the information about your request to disconnect will be saved to the blockchain. If the D.T.P will not perform an update transaction within one month, you will be disconnected without committing your transactions to the blockchain and will be able to double spend your coins. Therefore to prevent this from happening, the D.T.P is obliged to perform an update transaction at least once a month.
As I mentioned earlier, D.T.P can also save on your taxes. In the U.S there is a double taxation on crypto. Whenever you earn coins, you pay income tax, and also you need to remember the coins price in the day you received them. When you sell, trade or spend your coins you pay a sale tax or can claim a loss.
With D.T.P all the transactions are aggregated and happening at the same point in time, so if during the same month you both spent and earned coins, you won’t have to pay sale tax for them as you spent and got them at the same point in time, during the update transaction.
It also makes the life much easier for IRS, now in order to understand if someone owes sales-tax all they have to do is look at the blockchain and see if someone’s balance decreased after an update transaction, if so it means that the person spent more then he earned and need to pay sale tax for the difference. The IRS will not be able to tell how the person spent his coins and it’s also doesn’t matter for this tax purpose. Note however that you do need to report the income tax separately.
So now when buying a cup of coffee don’t worry about the transactions fees and forget about the IRS, instantly pay and go, using D.T.P with Coco technology and peace of mind.