Date: Fri, 05 Jul 2019 23:16:17 +0000
To: Eric Voskuil <eric@voskuil.org>
From: ZmnSCPxj <ZmnSCPxj@protonmail.com>
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Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] Generalized covenants with taproot enable
	riskless or risky lending,
	prevent credit inflation through fractional reserve
Precedence: list

Good morning Eric,


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=E2=80=90=E2=80=90=E2=80=90=E2=80=90=E2=80=90=E2=80=90=E2=80=90 Original Me=
ssage =E2=80=90=E2=80=90=E2=80=90=E2=80=90=E2=80=90=E2=80=90=E2=80=90
On Saturday, July 6, 2019 3:27 AM, Eric Voskuil <eric@voskuil.org> wrote:

> > On Jul 4, 2019, at 21:05, ZmnSCPxj ZmnSCPxj@protonmail.com wrote:
> > Good morning Eric,
> >
> > > As with Bitcoin mining, it is the consumed cost that matters in this =
scenario, (i.e., not the hash rate, or in this case the encumbered coin fac=
e value). Why would the advertiser not simply be required to burn .1 coin f=
or the same privilege, just as miners burn energy? Why would it not make mo=
re sense to spend that coin in support of the secondary network (e.g. payin=
g for confirmation security), just as with the burning of energy in Bitcoin=
 mining?
>
> Good morning ZmnSCPxj,
>
> > Using the unspentness-time of a UTXO allows for someone advertising a s=
ervice or producer to "close up shop" by simply spending the advertising UT=
XO.
> > For instance, if the advertisement is for sale of a limited stock of go=
ods, once the stock has been sold, the merchant (assuming the merchant used=
 own funds) can simply recover the locked funds, with the potential to rein=
vest them elsewhere.
> > This allows some time-based hedging for the merchant (they may be willi=
ng to wait indefinitely for the stock to be sold, but once the stock is sol=
d, they can immediately reap the rewards of not having their funds locked a=
nymore).
>
> This is a materially different concept than proposed by Tamas.
>
> =E2=80=9C...he gives up his control of the coins until maturity, he can n=
ot use them elsewhere until then.=E2=80=9D

Possibly.
In a way, this is giving up control of the coin, until he no longer needs t=
he advertisement, i.e. dynamically select the maturity age needed.

> > Similarly, an entity renting out a UTXO for an advertisement might allo=
w for early reclamation of the UTXO in exchange for partial refund of fee; =
as the value in the UTXO is now freed to be spent elsewhere, the lessor can=
 lease it to another advertiser.
>
> You appear to be proposing a design whereby either the owner or the rente=
r (not entirely clear to me which) can spend the =E2=80=9Clocked up=
=E2=80=9D coin at any time (no maturity constraint), by dropping the covena=
nt.
>
> If the renter can do this he can simply steal the coin from the owner.
>
> If the owner can do this there is no value to the renter (or as a proof o=
f cost), as the owner retains full control of the coin.
>

Obviously this will require a 2-of-2 multisig, with an timelocked transacti=
on that lets the owner recover at a futuredate, so that it is the agreement=
 of *both* that is needed to perform any actions before the timelock.
I already described this in the link I provided.


> If you mean that the age of the encumbrance is the proof of cost, this re=
quires no covenant. I don=E2=80=99t believe this is what you intended, just=
 covering all bases.

Not age of encumbrance, quite.
Instead, it is the simple fact that the UTXO is a UTXO (and not yet spent),=
 that validates the advertisement.

No, it does not *require* a covenant.
However, covenants do make it easier to use, in the sense that the renter c=
an repurpose the UTXO (e.g. change details of advertisement) without having=
 to contact the owner.


>
> > Burnt funds cannot be "un-burnt" to easily signal the end of a term for=
 an advertisement.
>
> And as I have shown above, nor can a =E2=80=9Clocked-up=E2=80=9D coin be =
unlocked to do the same.

You have shown no such thing, merely shown that you have not understood the=
 proposal.

Regards,
ZmnSCPxj