Except apparently you need to be online to send them the info after you cut the note. So its not really cold storage. What if their company shuts down?
You can do cold storage by securing seeds on metal, such as titanium, or any robust material you like.
Is this because you have a time-locked transaction to move the funds from the P2MS to a P2PKH? How does that work when it's "re-keyed"? Wouldn't each re-key move to a new P2MS and have a transaction fee associated with it as well as have a second transaction for the HTLC transaction?
How are you doing time-lock encryption in this instance? Is it based off of a separate blockchain contract or is it one of the more traditional methods?
The time lock lets you optimistically circulate the note prior to the expiration date as even if previous holders know the user key they cannot use it to claim the Bitcoin alone.
You can do cold storage by securing seeds on metal, such as titanium, or any robust material you like.