Re: [Bitcoin-development] Lowering confirmation requirements and preventing double spends

[Stefan Thomas <moon@justmoon.de>]

Hey Andy,

Bitcoin already does something which in practice has exactly this 
effect: If a transaction is reversed, any transactions based on its 
outputs are rejected.

Hosted wallets can make use of this - but as you correctly point out, 
depending on the service, it can get tricky. What if I exchange the 
money to USD and back before withdrawing? You could have an algorithm 
where MtGox prefers to spend outputs from your own deposits as the 
inputs for your withdrawals, it's not trivial though and never 100% secure.

I have trouble thinking of a good example where you need an explicit 
block dependency as you describe. The only times you'd want to use this 
dependency of transactions on specific previous transactions is when you 
can clearly and easily associate the money. But if you can clearly and 
easily associate the money, you might as well just relate the 
transactions (use the outputs from the deposit transaction as the inputs 
of the withdrawal transaction.)

This is btw something that would strongly agree with: Hosted wallets 
should absolutely keep each account as separate public keys. With that 
you lose free and instant internal transactions, but you gain instant 
deposits and much better risk isolation.

This is just my view. Thanks and keep the thought-provoking stuff coming!

Cheers,

Stefan

On 12/8/2011 11:47 AM, Andy Parkins wrote:
> Hello,
>
> Another of my crazy ideas:
>
> When a transaction is first broadcast, it should include the hash of the block
> it wants to appear after, let's call it's basis block.  That block can be
> anything the claimer wants; but it allows the miners to add this condition:
> the transactions outputs a new transaction claims must be before the new
> transaction's basis block.
>
> Consider this block chain fork:
>
>   * -- * -- F -- * -- 1 -- 4 -- 5
>              \
>               * -- 2 -- 3
>
> Let's say in block 2; I transfer coins from address A to Mt.Gox (or any other
> pooled-account online wallet).  In block 1 I transfer credit from address A to
> address B.  In block 3 I transfer credit from Mt.Gox's pool to address B.
>
> The chain at 3 races out first, but eventually the chain at 5 becomes "the
> one".  If Mt.Gox are foolish enough to broadcast my withdrawl in 3; there is
> nothing to stop that same withdrawl making it into 4 (since it comes from a
> pooled fund address).  Therefore Mt.Gox can't allow such a fast turnaround and
> must wait for six confirmations of 2 before allowing use of the funds.  That
> is an inconvenience for all the honest users.
>
> With my proposed change, the Mt.Gox transaction broadcast at 3 would include
> "block 2" as its basis block.  Therefore that transaction could never make it
> into block 4, as no miner will include a transaction based on block 2 in the
> block 4 chain.
>
> Mt.Gox is probably not a good example, as they have problems with fiat to deal
> with too.  However, for other online wallet accounts it would allow faster
> acceptance of received funds, since there is no danger of loss should an
> attacker arrange a reorganisation.
>
> This basis block would be optional (implied by the input transactions if it
> isn't present); and would only need storing for the pending transactions, so
> no incompatible change is needed to the block format.
>
>
>
> Andy