Are you really letting people pay with PayPal to send BitCoins to an arbitrary address?
If it's just 1 satoshi for $3 you might be fine (if PayPal doesn't notice), but don't even think of doing that with a more reasonable ratio, since you'll get raped by people cashing out stolen paypal or credit cards using it.
In general, I don't see why you are putting the hash in the address, rather than putting it in a comment in the transaction script, and sending BitCoin back to yourself (or perhaps doing a 0-ouput fee-only transaction, but not sure if that's accepted by clients).
My understanding is that, for $3 the author creates a transaction from some wallet of N bitcoins under the author's control, that has a distribution of:
0.000000001 to <hash of document>
N - 0.0000000001 - <fee> to owner's wallet #2
<fee> to miner
So the $3 doesn't buy you any bitcoins, since the address that is the hash of the document isn't a valid bitcoin address since it wasn't generated from a public/private key that is known.
You understand it exactly correctly. Also, I'm sending those transactions with 0.01 BTC (~$1.3) in fees, which is roughly half the $3 payment (after credit card processing fees).
The user can input whatever address they want, so technically they could use it to buy Bitcoins, but still - the amount is really tiny and insignificant, and it'll be highly non profitable ($3 for bitcoins worth ~$0.0000013).
It is technically possible to add arbitrary data to a transaction with OP_DROP, but it isn't widely supported enough, and most tools for exploring the blockchain won't display it in a convenient manner.
However, due to the changes in the way bitcoin-qt 0.8.2 handles dust outputs, I will probably need to change it to a different method in the future. For now, there are still a lot of miners that accepts those transactions.
Comments
Are you really letting people pay with PayPal to send BitCoins to an arbitrary address?
If it's just 1 satoshi for $3 you might be fine (if PayPal doesn't notice), but don't even think of doing that with a more reasonable ratio, since you'll get raped by people cashing out stolen paypal or credit cards using it.
In general, I don't see why you are putting the hash in the address, rather than putting it in a comment in the transaction script, and sending BitCoin back to yourself (or perhaps doing a 0-ouput fee-only transaction, but not sure if that's accepted by clients).
My understanding is that, for $3 the author creates a transaction from some wallet of N bitcoins under the author's control, that has a distribution of:
So the $3 doesn't buy you any bitcoins, since the address that is the hash of the document isn't a valid bitcoin address since it wasn't generated from a public/private key that is known.You understand it exactly correctly. Also, I'm sending those transactions with 0.01 BTC (~$1.3) in fees, which is roughly half the $3 payment (after credit card processing fees).
The user can input whatever address they want, so technically they could use it to buy Bitcoins, but still - the amount is really tiny and insignificant, and it'll be highly non profitable ($3 for bitcoins worth ~$0.0000013).
It's a nice touch that such a large percentage of the Paypal price goes to the miners.
It is technically possible to add arbitrary data to a transaction with OP_DROP, but it isn't widely supported enough, and most tools for exploring the blockchain won't display it in a convenient manner.
However, due to the changes in the way bitcoin-qt 0.8.2 handles dust outputs, I will probably need to change it to a different method in the future. For now, there are still a lot of miners that accepts those transactions.