Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: quoted-printable
From: Eric Voskuil <eric@voskuil.org>
Mime-Version: 1.0 (1.0)
Date: Thu, 4 Jul 2019 11:43:45 -0500
Message-Id: <F17F2E86-BFA4-456E-85F9-0D6583692AEC@voskuil.org>
References: <0DBC0DEA-C999-4AEE-B2E1-D5337ECD9405@gmail.com>
	<BF027CD0-FE29-4DD1-AB96-DE92B597AD18@gmail.com>
	<3F46CDD5-DA80-49C8-A51F-8066680EF347@voskuil.org>
	<A4A6099F-F115-4CBF-B7D5-F16581476126@gmail.com>
	<063D7C06-F5D8-425B-80CE-CAE03A1AAD0C@voskuil.org>
	<0AA10217-E1CC-46D1-9B43-038CEEF942CD@gmail.com>
	<E72C4A8E-F850-400B-B19B-7D06B8A169EC@voskuil.org>
	<A64C3DCB-10CE-45EA-9A1B-7E3D13DF90EA@gmail.com>
	<6B9A04E2-8EEE-40A0-8B39-64AA0F478CAB@voskuil.org>
	<SEQmsx6ck79biVthBbBk1b9r9-R45sBwqWrv3FewQIBl4J18sOlwAPRt8sbTIbrBB8DX538GfwQkU40lyODmEkGSwah_VmbXT8iOr2Jcjlw=@protonmail.com>
In-Reply-To: <SEQmsx6ck79biVthBbBk1b9r9-R45sBwqWrv3FewQIBl4J18sOlwAPRt8sbTIbrBB8DX538GfwQkU40lyODmEkGSwah_VmbXT8iOr2Jcjlw=@protonmail.com>
To: ZmnSCPxj <ZmnSCPxj@protonmail.com>
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

Hi ZmnSCPxj,

Generalizing a bit this appears to be the same with one exception. The amoun=
t of encumbered coin is relevant to an external observer. Of course the effe=
ctive dust limit is the maximum necessary encumbrance otherwise.

In the case of simple tracking, the market value of the coin is not relevant=
, all that is required is a valid output. Hence the devolution to 1 sat trac=
king. In your scenario the objective is to establish a meaningful cost for t=
he output.

A community of people using this as a sort of hashcash spam protection can r=
aise the amount of encumbered coin (i.e. advertising threshold price) requir=
ed in that context. The cost of this encumberance includes not only at least=
 one tx fee but market cost of the coin rental.

At a 1 year advertisement term, 10% APR capital cost, and threshold of 1 enc=
umbered coin, the same is achieved by burning .1 coin. In other words the re=
nter (advertiser) has actually paid to the coin owner .1 coin to rent 1 coin=
 for one year.

As with Bitcoin mining, it is the consumed cost that matters in this scenari=
o, (i.e., not the hash rate, or in this case the encumbered coin face value)=
. Why would the advertiser not simply be required to burn .1 coin for the sa=
me privilege, just as miners burn energy? Why would it not make more sense t=
o spend that coin in support of the secondary network (e.g. paying for confi=
rmation security), just as with the burning of energy in Bitcoin mining?

e

> On Jul 3, 2019, at 23:57, ZmnSCPxj <ZmnSCPxj@protonmail.com> wrote:
>=20
> Good morning Eric,
>=20
>=20
>>> and thanks to you and ZmnSCPxj we now have two additional uses cases for=
 UTXOs that are only temporarily accessible to their current owner.
>>=20
>> Actually you have a single potentially-valid use case, the one I have pre=
sented. The others I have shown to be invalid (apart from scamming) and no a=
dditional information to demonstrate errors in my conclusions have been offe=
red.
>=20
> I presented another use case, that of the "Bitcoin Classified Ads Network"=
.
> https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2019-July/017083.h=
tml
>=20
> Advertisements are "backed" by an unspent TXO.
> In order to limit their local resource consumption, nodes of this network w=
ill preferentially keep advertisements that are backed by higher UTXO values=
 divided by advertisement size, and drop those with too low UTXO value divid=
ed by advertisement size.
>=20
> Thus, spammers will either need to rent larger UTXO values for their spam,=
 paying for the higher rent involved, or fall back to pre-Bitcoin spamming m=
ethods.
> Thus I think I have presented a use-case that is viable for this and does n=
ot simply devolve to "just burn a 1-satoshi output".
>=20
> I still do not quite support generalized covenants as the use-case is alre=
ady possible on current Bitcoin (and given that with just a little more tran=
saction introspection this enables Turing-completeness), but the basic conce=
pt of "renting a UTXO of substantial value" appears sound to me.
>=20
>=20
> Regards,
> ZmnSCPxj