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From: Johnson Lau <jl2012@xbt.hk>
In-Reply-To: <KFCfNAmHhRvsDJs70UW3l4ssqBtdBrb8gYP5A3cN2hsTPrXVg7f5Yrt2LOo5V0QdAhhoooc3lllXxiiXSVt_28obYBl_XKAgEQkGg1kOj8I=@protonmail.com>
Date: Sun, 23 Dec 2018 00:56:29 +0800
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To: ZmnSCPxj <ZmnSCPxj@protonmail.com>
Cc: bitcoin-dev <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] Safer NOINPUT with output tagging
Precedence: list


> On 22 Dec 2018, at 10:25 PM, ZmnSCPxj <ZmnSCPxj@protonmail.com> wrote:
>=20
> Good morning Johnson,
>=20
>> Generally speaking, I think walletless protocol is needed only when =
you want to rely a third party to open a offchain smart contract. It =
could be coinswap, eltoo, or anything similar.
>=20
> I think a third party would be pointless in general, but then I am =
strongly against custodiality.
>=20
> The idea is that you have some kind of hardware wallet or similar =
"somewhat cold" storage *that you control yourself*, and crate channels =
for your hot offchain Lightning wallet, without adding more transactions =
from your somewhat-cold storage to your hot offchain Lightning wallet on =
the blockchain.
>=20
> Then you could feed a set of addresses to the hot offchain wallet =
(addresses your somewhat-cold storage controls) so that when channels =
are closed, the funds go to your somwhat-cold storage.
>=20
> I also doubt that any custodial service would want to mess around with =
deducting funds from what the user input as the desired payment.  I have =
not seen a custodial service that does so (this is not a scientific =
study; I rarely use custodial services); custodial services will deduct =
more from your balance than what you send, but will not modify what you =
send, and will prevent you from sending more than your balance minus the =
fees they charge for sending onchain.
>=20
> Even today, custodial services deducting from your sent value (rather =
than the balance remaining after you send) would be problematic when =
interacting with merchants (or their payment processors) accepting =
onchain payments; the merchant would refuse to service a lower value =
than what it charges and it may be very technically difficult to recover =
such funds from the merchant.
> I expect such a custodial service would quickly lose users, but the =
world surprises me often.
>=20
> Regards,
> ZmnSCPxj


If the users are expected to manually operate a hardware wallet to fund =
the channel, they might do stupid things like using 2 wallets to make 2 =
txs, thinking that they could combine the values this way; or =
=E2=80=9Crefilling=E2=80=9D the offchain wallet with the address, as you =
suggested. While I appreciate the goal to separate the coin-selecting =
wallet with the offchain wallet, I am not sure if we should rely on =
users to do critical steps like entering the right value or not reusing =
the address. Especially, the setup address should be hidden from =
user=E2=80=99s view, so only a very few =E2=80=9Cintelligent advanced =
users" could try to refill the channel.

If we don=E2=80=99t rely on the user as the bridge between the hardware =
wallet and the offchain wallet, we need a communication protocol between =
them. With such protocol, there is no need to spend the setup TXO with =
NOINPUT.=