Date: Sat, 22 Dec 2018 14:25:16 +0000
To: Johnson Lau <jl2012@xbt.hk>
From: ZmnSCPxj <ZmnSCPxj@protonmail.com>
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Cc: bitcoin-dev <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] Safer NOINPUT with output tagging
Precedence: list

Good morning Johnson,

> Generally speaking, I think walletless protocol is needed only when you w=
ant to rely a third party to open a offchain smart contract. It could be co=
inswap, eltoo, or anything similar.

I think a third party would be pointless in general, but then I am strongly=
 against custodiality.

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 some=
what-cold storage to your hot offchain Lightning wallet on the blockchain.

Then you could feed a set of addresses to the hot offchain wallet (addresse=
s your somewhat-cold storage controls) so that when channels are closed, th=
e funds go to your somwhat-cold storage.

I also doubt that any custodial service would want to mess around with dedu=
cting funds from what the user input as the desired payment.  I have not se=
en a custodial service that does so (this is not a scientific study; I rare=
ly use custodial services); custodial services will deduct more from your b=
alance than what you send, but will not modify what you send, and will prev=
ent you from sending more than your balance minus the fees they charge for =
sending onchain.

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; t=
he 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 merchan=
t.
I expect such a custodial service would quickly lose users, but the world s=
urprises me often.

Regards,
ZmnSCPxj