Re: [bitcoin-dev] BIP proposal: Timelocked address fidelity bond for BIP39 seeds

From: Eric Voskuil <eric@voskuil•org>
To: Chris Belcher <belcher@riseup•net>,
	Bitcoin Protocol Discussion
	<bitcoin-dev@lists•linuxfoundation.org>
Subject: Re: [bitcoin-dev] BIP proposal: Timelocked address fidelity bond for BIP39 seeds
Date: Tue, 3 May 2022 11:26:52 -0700	[thread overview]
Message-ID: <48D4B621-D862-4031-AE43-3F54D34FB0B5@voskuil.org> (raw)
In-Reply-To: <f3892570-6c45-47ee-2804-9988ff18bdf5@riseup.net>

It looks like you are talking about lending where the principal return is guaranteed by covenant at maturity. This make the net present value of the loan zero.

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> On May 3, 2022, at 11:03, Chris Belcher via bitcoin-dev <bitcoin-dev@lists•linuxfoundation.org> wrote:
> 
> Hello ZmnSCPxj,
> 
> Such a system will have to be publicly advertised, in the same way we see centralized cryptocurrency staking shops buying ads all over the place. That's how they'll make retail hodlers aware that renting out your coins in this way is possible. If JoinMarket/Teleport users notice such ads appearing then we could change the taker code to remove the intermediate certificate keypair, and have the fidelity bond UTXO key sign the endpoint (IRC nickname or onion hostname) directly. This removes the possibility of fidelity bonds in cold storage. It would have to be done for privacy, and it wouldn't be too bad. Right now there's no cold storage solution for fidelity bonds yet JoinMarket has about 600 bitcoins locked up and advertised, which must be all on hot wallets.
> 
> Best,
> CB
> 
>> On 03/05/2022 06:26, ZmnSCPxj wrote:
>> Good morning Chris,
>>> Hello ZmnSCPxj,
>>> 
>>> Renting out fidelity bonds is an interesting idea. It might happen in
>>> the situation where a hodler wants to generate yield but doesn't want
>>> the hassle of running a full node and yield generator. A big downside of
>>> it is that the yield generator income is random while the rent paid is a
>>> fixed cost, so there's a chance that the income won't cover the rent.
>> The fact that *renting* is at all possible suggests to me that the following situation *could* arise:
>> * A market of lessors arises.
>> * A surveillor creates multiple identities.
>> * Each fake identity rents separately from multiple lessors.
>> * Surveillor gets privacy data by paying out rent money to the lessor market.
>> In defiads, I and Tamas pretty much concluded that rental would happen inevitably.
>> One could say that defiads was a kind of fidelity bond system.
>> Our solution for defiads was to prioritize propagating advertisements (roughly equivalent to the certificates in your system, I think) with larger bonded values * min(bonded_time, 1 year).
>> However, do note that we did not intend defiads to be used for privacy-sensitive applications like JoinMarket/Teleport.
>> Regards,
>> ZmnSCPxj
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