Date: Sat, 06 Jun 2020 04:25:11 +0000
To: ZmnSCPxj <ZmnSCPxj@protonmail.com>,
 Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
From: ZmnSCPxj <ZmnSCPxj@protonmail.com>
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Subject: Re: [bitcoin-dev] Design for a CoinSwap implementation for
	massively improving Bitcoin privacy and fungibility
Precedence: list

Good morning a third time Chris,

Now unrelated to the funding order, but one of the reasons why timeliness i=
s desirable for CoinSwap is that if possible, we want to ensure that sends =
from a user wallet are not correlatable with receives into that wallet.
Thus, there is the strong suggestion that before sending to a payee, the us=
er wallet should swap, then use the swapped funds to pay the payee, i.e. sw=
ap-on-pay.
JoinMarket does this in `sendpayment.py`, for example, and this is the reco=
mmended way to perform payments out of the JoinMarket wallet.

Let me propose an alternative: swap-on-receive+swap-on-change.

ZeroLink already suggests that wallets maintain two internal wallets: a pre=
-mix wallet and a post-mix wallet.
With swap-on-receive, when the user wants a receive address, the wallet get=
s it from the pre-mix wallet address.
Then, when wallet notices any unspent funds on any pre-mix wallet address, =
the wallet automatically swaps it into the post-mix wallet.
This is swap-on-receive.
Long-term HODLing goes into post-mix wallet addresses.

Then, when sending, the wallet selects from the post-mix wallet coins, and =
spends those coins directly into the payee address.
If there is no exact amount, it has to have change.
The change output does *not* go to the pre-mix or post-mix wallet address.
Instead, it goes to a 2-of-2 funding outpoint for a new swap immediately.

This lets the payee receive its funds quickly, as soon as the transaction c=
onfirms, without waiting for the CoinSwap to complete.
Of course, the user now has to be online to *fully* receive funds (the user=
 cannot spend the funds until it is in the post-mix wallet).

Regards,
ZmnSCPxj