Subject: Re: [Bitcoin-development] instant confirmation via payment protocol backwards compatible proto buffer extension

From: Lawrence Nahum <[email-masked]>
Date: Mon, 16 Jun 2014 16:30:45 +0000 (UTC)

Mike Hearn <mike <at> plan99.net> writes:

> Please see https://github.com/bitcoin/bitcoin/pull/3883 which implements 
this exact scheme. It can solve some kinds of double spends (probably), but 
others - like ones done by corrupt miners (see bitundo) - can't be solved 
this way.

I read the comments on the PR. I mean no disrespect but this patch can't 
prevent double spends minutes apart and a solution is as good as it's 
weakest link.

It also seems to suffer from potential ddos and otherwise may provide a 
false sense of security. I wouldn't call it a solution in sight just yet.

> Lawrence's motivation for this BIP is essentially to act as a backup in 
case the Bitcoin native double spending protections end up being too weak to 
be useful. It reintroduces a notion of centralised trust as a layer on top 
of the Bitcoin protocol, but only for cases where the seller/recipient feels 
it'd be useful. In this way it gives us slack: if someone is able to 
reliably double spend and the merchants losses due to payment fraud go up, 
we can fall back to TTPs for a while until someone finds a solution for 
Bitcoin, or we just give up on the Bitcoin experiment, but hey - at least we 
now have a better intermediary protocol than SWIFT 

I wouldn't put it just like that. Sure, it's a backup to the double spend 
solution in case we don't reach one - but also, even if you reach some 
reasonable compromise I assume it won't be instant and instant confirmation 
between exchanges can create huge arbitrage opportunities and as such 
liquidity.

It's not really aimed at the merchant but more at service providers and 
payment processors - or simply, between users that don't know each other in 
local traders environments/squares, assuming they are ok trusting a 
known/respected/reputable third party.

> In practice of course this is something payment processors like Bitpay and 
Coinbase will think about. Individual cafes etc who are just using mobile 
wallets won't be able to deal with this complexity: if we can't make native 
Bitcoin work well enough there, we're most likely to just lose that market 
or watch it become entirely centralised around a handful of payment 
processing companies.

What do you expect for e-commerce and escrow to happen? Don't you think the 
market will naturally converge to a handful of hubs that will helps with 
refunds and things like that? Or do you expect to just 'trust' all people on  
online markets and smaller unknown online shops?

I mean, the beauty of Bitcoin is that it brings much more transparency and 
the tools to build such things without huge barriers to entry and without 
using closed protocols - not that it solves _every_ problem.