From mboxrd@z Thu Jan 1 00:00:00 1970 Return-Path: Received: from smtp1.linuxfoundation.org (smtp1.linux-foundation.org [172.17.192.35]) by mail.linuxfoundation.org (Postfix) with ESMTPS id 29F6E3447 for ; Tue, 9 Jul 2019 10:31:21 +0000 (UTC) X-Greylist: domain auto-whitelisted by SQLgrey-1.7.6 Received: from mail-40133.protonmail.ch (mail-40133.protonmail.ch [185.70.40.133]) by smtp1.linuxfoundation.org (Postfix) with ESMTPS id 04F58148 for ; Tue, 9 Jul 2019 10:31:19 +0000 (UTC) Date: Tue, 09 Jul 2019 10:31:12 +0000 DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=protonmail.com; s=default; t=1562668277; bh=Dk9HlRu2wMLIyJxRPKzj0/wH70Wd3FEA/5bwWhDIhdw=; h=Date:To:From:Reply-To:Subject:In-Reply-To:References:Feedback-ID: From; b=ZXNf8dL1Z5O4xL3M+orOqtJV5h43Zzv/O4XJ+Xnbd55PuJt0rq9rA5FqEvXHcdcFe Rzjp/OymGivMFXKmRLbaDFCPaZzGgQM+1q+B+wQ5ByC95WaJ4Dh8WIDCrILF1Qd1rb ukelfmUZdIV0G5ruXkW1ieXhglrxhxH2Ix8XS/NM= To: bitcoin-dev From: ZmnSCPxj Reply-To: ZmnSCPxj Message-ID: In-Reply-To: <501EFBBA-8A14-4B64-BD77-1ED5119154EA@gmail.com> References: <0DBC0DEA-C999-4AEE-B2E1-D5337ECD9405@gmail.com> <4mT6iC4Va7Afg15a5NLbddAnF2a_vAcQSXYr_jg_5IyEK2ezblJff7EJZakoqvp4BJlLitt9Zlq1_l5JadR0nVss7VDPW-pv8jXGh7lkFC4=@protonmail.com> <0851B842-34A1-427F-95DC-A1D6AB416FB9@voskuil.org> <8D68DC86-1173-43AC-BC84-FE2834741C13@gmail.com> <501EFBBA-8A14-4B64-BD77-1ED5119154EA@gmail.com> Feedback-ID: el4j0RWPRERue64lIQeq9Y2FP-mdB86tFqjmrJyEPR9VAtMovPEo9tvgA0CrTsSHJeeyPXqnoAu6DN-R04uJUg==:Ext:ProtonMail MIME-Version: 1.0 Content-Type: text/plain; charset=UTF-8 Content-Transfer-Encoding: quoted-printable X-Spam-Status: No, score=-2.2 required=5.0 tests=BAYES_00,DKIM_SIGNED, DKIM_VALID, DKIM_VALID_AU, FREEMAIL_FROM, FROM_LOCAL_NOVOWEL, RCVD_IN_DNSWL_LOW autolearn=ham version=3.3.1 X-Spam-Checker-Version: SpamAssassin 3.3.1 (2010-03-16) on smtp1.linux-foundation.org X-Mailman-Approved-At: Tue, 09 Jul 2019 18:49:26 +0000 Subject: Re: [bitcoin-dev] Generalized covenants with taproot enable riskless or risky lending, prevent credit inflation through fractional reserve X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.12 Precedence: list List-Id: Bitcoin Protocol Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Tue, 09 Jul 2019 10:31:21 -0000 Good morning all, I will attempt to restart my thinking from initial principles regarding my = proposed "Bitcoin Classified Ads Network". Nodes behave this way: * Nodes in this network gossip advertisements. * These advertisements refer to a UTXO that must be unspent at the chain ti= p considered by each node, else they would be rejected. * The referred UTXO must contain a commitment to the text of the advertisem= ent, else the advertisement is rejected. * Nodes have a maximum limit on the total size of all advertisements they r= etain and propagate to new nodes, or gossip to their peers. This is a deliberate design decision. * If nodes exceed the above limit, they will sort advertisements according = to a value-rate, the value of the UTXO divided by the storage size of the a= dvertisement, and prune advertisements with low value-rate until they are w= ithin the limit again. * Once the backing UTXO is spent, the advertisement is removed by nodes tha= t follow that chaintip. * As the name ***Classified Ads*** suggests, each advertisement also indica= tes a "class" in which they belong to. Then, from the above, we derive how a seller might behave. * Sellers will attempt to put the minimum possible value into a UTXO commit= ting to an advertisement, to reduce the opportunity cost of using the value= elsewhere. * Thus the rent of the advertisement in this case is paid to joinmarket mak= ers and LN forwarding nodes, as the value used in a UTXO backing an adverti= sement is not useable in joinmarket/LN. * Sellers remain in full control of their advertising UTXO, and can spend i= t at any time. * Sellers may spend part of the UTXO and put the remaining funds into a cha= nge address that is a new advertising UTXO, and re-transmit the advertiseme= nt, this time pointing to the new change UTXO. * However, if the remaining change becomes too low, then its value-rate may= drop below the lowest value-rate that BCAN nodes will retain in their (del= iberately limited) storage, thus also deleting their advertisement from the= BCAN. * Presumably, the reason for advertising at all, is that the seller conside= rs the cost of advertising to be less than the expected gain of actually se= lling their product. * Thus, even if the seller has the ability to spend the UTXO at any time, t= hey run the risk of spending too much and thus removing their advertisement= from the BCAN, and losing the expected gain of having the advertisement ex= ist on the BCAN. * A utility-maximizing seller would therefore not spend a minimal-value UTX= O backing the advertisement until it has gained the advantage of actually s= elling the product, even if it has the option to do so: it is a forced move= . * The cost of keeping the minimal-value UTXO unspent is the opportunity cos= t in that the value may have been used in joinmarket or LN instead. * The minimum value will largely be dependent on how much the BCAN is used;= more sellers advertising over BCAN will increase the minimum value. * If the minimum value that is viable to keep its advertisement alive goes = higher, then the opportunity cost of the seller using the same value elsewh= ere might exceed the expected gain from selling the product. However, this is expected of *any* advertising scheme: if the gains from = selling is too small to justify the advertisement price, advertising does n= ot happen; this is expected utility-maximizing behavior. * If competitors of the seller exist and the BCAN node storage is already f= illed, competitors can increase the minimum value of a UTXO that can keep a= n advertisement alive on BCAN by simply adding more of their advertisements= to BCAN. * Thus we expect that, once the BCAN node storage is at or near the maximum= value, the minimum value of a UTXO that can back an advertisement will app= roach the expected gain from selling the product. Thus the system of simply committing UTXOs to particular advertisement text= s seems sufficient to extract value from a seller wishing to advertise. The purpose of this extraction of value is to ensure that spam does not ove= rload the BCAN. Let us now consider some kind of specialization, where a HODLer specializes= in owning UTXOs, while an advertiser specializes in trading products that = need advertising of some kind. * We assume that the specialization means that the HODLer cannot feasibly m= ake and sell products on its own, while the advertiser cannot own and contr= ol UTXOs of the minimum value needed to keep their advertisement alive on t= he BCAN. * We assume that the specialization means that the advertiser can make and = sell products for cheaper than the HODLer can, while the HODLer can own and= control (and secure) UTXOs of the minimum value needed for advertisements = to be kept alive, for cheaper than the advertiser can. Then: * A HODLer may offer to provide a UTXO locked by a 2-of-2 with a commitment= to an advertisement of the advertiser's choosing, in exchange for rent of = the value, plus an unbreakable promise to return the rented UTXO value back= to the HODLer (represented by a `nLockTime` pre-signed transaction that re= turns the 2-of-2 back to the HODLer control). * The HODLer is effectively lending the UTXO out to the advertiser, for the= time frame agreed upon by the advertiser. * The rent at which the HODLer lends out the UTXO must be between the oppor= tunity cost of instead securely utilizing the UTXO in LN or joinmarket, and= the expected gain the advertiser expects from having its product advertise= d. * The HODLer is assumed to have the ability to secure the UTXO and retain= all data it needs to recover the UTXO; this is part of the assumption that= the HODLer specializes in such. * The advertiser is assumed to have positive gains from creating, adverti= sing, and selling its product; this is part of the assumption that the adve= rtiser specializes in such. * The HODLer and advertiser can agree to refund part of the rent, if the ad= vertiser signs a transaction that immediately returns control of the value = to the HODLer, before the agreed `nLockTime`. * The above constructions can be done in current Bitcoin. * However, the same constructions could be done with a covenant as proposed= by Tamas, possibly with reduced communication/coordination costs between t= he advertiser and HODLer. Now, there remains the question as to whether users will actually patronize= the BCAN instead of existing advertising systems. * We assume that privacy is valuable to users. * We assume that users of BCAN will run BCAN nodes. This leaks them as users of BCAN, a small loss of privacy. Then: * Users can look for advertisements of specific classes by simply querying = their own BCAN node. This does not leak privacy ata all as long as the communication channel o= f the user with their own BCAN node is private. * Compare this to alternatives, which involve some entity observing the b= ehavior of users and thus invading their privacy. * Advertisers that misclassify their advertisements will be unable to reach= their target audience. * Utility-maximizing advertisers will correctly indicate the class of their= advertisements, as otherwise they would be paying the advertising cost wit= hout gaining the benefit of the advertisement. Regards, ZmnSCPxj