Subbit Presents a Cardano Payment Channel for Usage-Based API Billing

Dominic Wallis presented Subbit.xyz at the 77th Cardano Developers Office Hours with a specific problem: an API request can cost less than the fee and time required for a blockchain transaction. His system pairs signed payment commitments with a Cardano smart contract, allowing a provider to serve small requests and collect the approved charges later. The presentation showed how the payment components communicate, while a production service integration remains the project’s next step.

A Payment Channel Built for Metered Services

Subbit.xyz is designed for services that can measure what a customer consumes, such as API calls, data transfers, or AI requests. Monthly subscriptions charge for a period of access, while invoices arrive after usage has occurred. Wallis proposed a closer connection between each unit of service and the amount the customer authorizes.

A customer opens a channel by depositing funds under the rules of a Cardano smart contract. When requesting service, the customer signs an IOU stating the cumulative amount the provider may collect. The provider checks the signature and the funds backing it before fulfilling the request. Each IOU is tied to its channel, preventing a signature intended for one account from being reused against another.

The channel is limited to two participants, with payments flowing from customer to provider. The customer can stop authorizing new charges, while the provider holds a claim for service already delivered. The channel governs payment; it does not verify the quality of an API response or how the provider handles sensitive information.

How Claims and Channel Closure Work on Cardano

The provider can submit the latest IOU to the smart contract and claim the authorized amount while the channel remains open. Earlier claims are accounted for, so the same amount cannot be withdrawn again. If the customer adds funds, the relationship can continue without opening a new channel.

Wallis illustrated the setup with 10 ADA allocated for service and an additional 2 ADA reserved for Cardano’s UTxO requirements. The customer can close the channel when they want to leave. The provider then has a period agreed at opening to make a final claim, after which the customer can recover the balance.

Providers serving many customers can combine claims in one transaction. Wallis showed an example that accounted for 47 channels at a cost of approximately 38 US cents. This was a figure from his presentation, not a reported average for production traffic. He identified the amount of transaction data as the immediate constraint on expanding such batches.

The integration design places an issuer beside the customer’s application and a proxy in front of the provider’s existing service. The issuer attaches an IOU to a request. The proxy verifies it and forwards an accepted request to the service.

Providers would still need to operate these payment components and follow relevant channel activity on Cardano, even if their original application does not implement blockchain logic.

The Remaining Test Is a Real Service Integration

Questions from participants exposed several boundaries of the model. Refunds require a separate payment because the channel moves funds in only one direction. A provider concerned about asset price changes can claim funds promptly or revise prices for future requests. Wallis also demonstrated that a channel can use another asset and mentioned USDM as an example.

Claims settled on Cardano reveal the amounts collected, although individual service requests stay off-chain. Participants asked whether zero-knowledge proofs could improve privacy or batching. Wallis argued that such a design would add complexity and that transaction data size is the more immediate scaling issue for Subbit.xyz.

Another participant, David, pressed Wallis on demand: which provider would change its billing system to use the channel? Wallis discussed potential uses in API infrastructure, AI billing, and metered data delivery. He described earlier work with Orcfax and acknowledged Project Catalyst support, but did not present a current production integrator or commercial usage figures.

In the closing demonstration, the issuer and server exchanged payment data, but the underlying service was not executed. Wallis invited providers to integrate Subbit.xyz. That would allow the next demonstration to connect all three parts of the transaction: a measured service response, the customer’s signed IOU, and the provider’s claim on Cardano.