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Date: Sun, 23 Oct 2022 09:20:41 -1000
From: "David A. Harding" <dave@dtrt.org>
To: Sergej Kotliar <sergej@bitrefill.com>, Bitcoin Protocol Discussion
 <bitcoin-dev@lists.linuxfoundation.org>
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Subject: Re: [bitcoin-dev] [Opt-in full-RBF] Zero-conf apps in immediate
 danger
Precedence: list

On 2022-10-19 04:29, Sergej Kotliar via bitcoin-dev wrote:
> The biggest risk
> in accepting bitcoin payments is in fact not zeroconf risk (it's
> actually quite easily managed), it's FX risk as the merchant must
> commit to a certain BTCUSD rate ahead of time for a purchase. Over
> time some transactions lose money to FX and others earn money - that
> evens out in the end. But if there is an _easily accessible in the
> wallet_ feature to "cancel transaction" that means it will eventually
> get systematically abused.

One way to address this risk is by turning it into a certainty.  If the 
price of BTC increases between when the invoice is generated and when a 
transaction is included in a block, give the customer a future purchase 
credit equal in value to the difference between the price they paid and 
the value of the purchase at confirmation time.  Now there's no benefit 
to the customer from canceling their transaction.

Of course, this means that the merchant will always either break even or 
lose money on the exchange rate part of the transaction and will need to 
raise their prices accordingly.  I can see how that would be unappealing 
to implement, but it seems better to me to address the incentive 
incompatibility you've raised rather than hope no large miners ever 
start performing full RBF.  Plus, maybe the future credit feature is 
something customers would like: I know I've been sad several times when 
the exchange rate changed significantly while I was waiting for one of 
my transactions to confirm.

The above mitigation is also compatible with LN payments.  For example, 
a merchant today might issue an LN invoice that expires in 10 minutes.  
The customer can wait for most of that time to elapse to see how the 
exchange rate changes before deciding to pay, obtaining the same 
American call option.  If they are instead offered a future purchase 
credit for any gains, the customer doesn't suffer any opportunity cost 
by paying immediately.  (With LN, it might be possible to have a better 
UX for this by either refunding any excess or (if using something like 
Original AMP or PTLCs) not claiming any parts of the payment which are 
in excess.)

-Dave