Subject: [bitcoin-dev] P2P trading replacement transactions

From: alicexbt <[email-masked]>
Date: Fri, 05 Aug 2022 14:44:52 +0000

Hi Bitcoin Developers,

Does it make sense to trade replacement transactions for privacy? I have shared basic details to implement this and would love to read opinions about it or ways to improve it:

=============================
alice
=============================

tx1: input a (0.01) -> output b1 (0.008)
-> change c1 (0.001)

tx2: input a (0.01) -> output e2 (0.007)
-> output f2 (0.001)

=============================

bob
=============================

tx1: input d (0.011) -> output e1 (0.007)
-> change f1 (0.003)

tx2: input d (0.011) -> output b2 (0.008)
-> output c2 (0.001)

=============================

carol
=============================

- creates an API to manage trades that will use 2 of 3 multisig
- alice and bob create orders for replacement
- either they could be matched automatically using some algorithm or bob manually accepts the offer
- 2 of 3 multisig is created with Alice, Bob and Carol keys
- bob locks 0.01 BTC in it and shares outputs e2,f2 with alice
- alice signs tx2 and shares tx with bob
- alice locks 0.011 BTC in it and shares outputs b2,c2 with bob
- bob signs tx2 and shares with alice
- both replacement txs can be broadcasted
- funds are released from 2 of 3 multisig with a tx having 3 outputs (one to pay fee which goes to carol)

positives:

- privacy

negatives:

- extra fees
- will take some time although everything will be managed by wallet with API provided by carol
- need to lock bitcoin with same amount as used in tx1
- amounts could still be used to link txs in some cases- carol and other peer knows the details

/dev/fd0

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