Date: Tue, 02 Jul 2019 03:45:31 +0000
To: Eric Voskuil <eric@voskuil.org>,
	Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
From: ZmnSCPxj <ZmnSCPxj@protonmail.com>
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Subject: Re: [bitcoin-dev] Generalized covenants with taproot enable
	riskless or risky lending,
	prevent credit inflation through fractional reserve
Precedence: list

Good morning Eric, and Tamas,

> In the case of tracking an asset that becomes worthless at a specific tim=
e, one could value a record of ownership, and the ability to trade ownershi=
p of the asset during the period. Consider colored coin type tracking of a =
theater ticket for a specific show, where the ticket is worthless by the en=
d of the show.

As it happens, I was playing around with another idea I am developing.
And it involves something very much similar, but distinct.

In particular, currencies are worthless unless exchanged for things of valu=
e to existent beings.
And the discovery of things of value is enabled by advertising.
The idea I am developing, is that of a "Bitcoin Classified Ads Network", wh=
erein ordinary P2PKH UTXOs (or P2WPKH equivalents) embed a commitment to an=
 advertisement.
A secondary network of nodes (separate from the Bitcoin network) transmits =
the actual advertisements, as well as the UTXOs being used to commit to the=
m.
This secondary network would then reject/purge advertisements once the UTXO=
 is spent on the Bitcoin blockchain.
This makes advertising costly (for the opportunity cost of locking some mon=
ey in a UTXO until one has acquired actual paying custom) while reducing im=
pact on Bitcoin blockchain space (commitment to the advertisment is in the =
same space as the ownership of the coin).
Changing the advertisement one makes is possible, at the cost of paying for=
 a transaction in the Bitcoin blockchain to spend the old UTXO and publish =
a new UTXO now committing to the new advertisement.

Of note is that I also derived that it would be beneficial, for some HODLer=
s to offer their funds for the purpose of making these advertisements.
Some service or product provider would agree with an advertiser to lock som=
e coins of the advertiser for a limited amount of time, in exchange for pay=
ment upfront, with the coin address committing to the indicate advertisemen=
t of the service or product provider.
This can be done by paying to a 2p-ECDSA (or with Schnorr, MuSig) public ke=
y, with the service/product provider embedding a commitment to its advertis=
ement to its own key, and a pre-signed `nLockTime` transaction that lets th=
e advertiser recover the money.

This is in fact a similar use to the "theater ticket" case you mentioned, y=
et distinct.
In the case of the Bitcoin Classified Ads Network, it is the intermediate a=
ddresses used before reclamation by the advertiser that is valuable, as the=
y also serve as commitments to advertisements, attesting to the (probable) =
validity of the advertisement and making spam have a cost.
Given that nodes of the Bitcoin Classified Ads Network will have memory lim=
its, advertisements whose "lockup-rate" (i.e. the amount of value of the ba=
cking UTXO, divided by the size of the advertisement) are low could be evic=
ted from memory before advertisements with high lockup-rate, and thus be le=
ss likely to propagate across the network.
Thus service/product providers would want to increase their "marketing budg=
et" to be less likely to be evicted from nodes of the Bitcoin Classified Ad=
s Network, which is beneficial as it increases the minimum practical lockup=
-rate needed to spam the network, thus making spam costly.

My current plan is that the provider can contact the advertiser in order to=
 effect changes to their advertisement.
Then the provider and the advertiser sign a new timelocked reclamation tran=
saction, then sign a transaction moving from the old advertisement to the n=
ew advertisement (presumably there is some protocol for ensuring the advert=
iser gets paid for this, such as an HTLC that can be triggered by an onchai=
n payment or by an LN payment; I have the details in my processing space bu=
t require some time to serialize to human-readabe format).

Arguably, this example seems to show that generalized covenants are not nee=
ded in fact, if transfers of coin require paying to the issuer/lender of th=
e coin.
Generalized covenants allows the provider (or ticket-holder in your example=
) to effect transfers from one advertisement to another (or one ticket-hold=
er to another in your example) without cooperation with the advertiser (or =
ticket-issuer in your example).
This would be otherwise needed if we lock using a 2-of-2 address that has a=
 timelocked transaction to reclaim the funds.

Regards,
ZmnSCPxj