Published on: 2020-02-01T00:39:36+00:00
In an email conversation between ZmnSCPxj and David on Bitcoin development, a mechanism for feerate insurance against onchain feerate spikes is proposed. The proposal involves Alice and Ingrid arranging a series of transactions with a specific locktime and sequence. However, the plan has a flaw as Ingrid can rescind the pre-signed transactions before confirmation by double spending her UTXO via an RBF fee bump.To address this issue, a patch is suggested that allows the Ingrid-input to be under the control of both Ingrid and Alice using a 2-of-2 mechanism. However, this solution leads to new problems of denial of service. Another possible insurance policy is proposed for Lightning channel closures. In this scenario, Alice prepays Ingrid using a CoinJoined transaction for the combined premium plus Ingrid inputs value locked to Alice && Ingrid. At each commitment transaction signing, there is an additional unencumbered tiny output that Alice can claim immediately. To ensure flexibility in closing the channel, Ingrid and Alice create an insurance transaction with high feerate that spends the tiny output and the Alice&&Ingrid output. The fees are deducted from the Alice&&Ingrid output, and the remaining amount is returned to Ingrid. If fees are low at the time of unilateral close, Alice can claim the tiny output itself. However, if fees are high, Alice sacrifices the tiny output and attaches the insurance transaction with a high feerate.If Ingrid does not cooperate on a new commitment transaction, Alice can drop onchain and punish Ingrid by dropping the previous commitment and broadcasting the insurance transaction. The upper bound for what Alice will pay to ensure its channel is closeable at any time quickly is the entire point of this proposal.In a Bitcoin development discussion, ZmnSCPxj proposes a mechanism for feerate insurance against on-chain feerate spikes. The proposed mechanism involves a series of transactions with RBF enabled and no relative locktime at the current block height. Alice and Ingrid arrange inputs and outputs with Bob, Alice, and Ingrid as recipients. However, if Alice needs to trust Ingrid anyway, they might as well use an external accounting and payment mechanism.During LNConf 2019, Jack Mallers presented a proposal for creating a futures market on onchain feerates. This would create an insurance policy against increases in feerate by having miners take short positions on fees while users take long positions on fees. This mechanism is necessary to have a smooth experience interfacing between onchain and offchain transactions.Overall, the proposal aims to create a smoother experience when transferring funds between onchain and offchain, providing feerate insurance and addressing issues related to confirmation timings and fee spikes.
Updated on: 2023-08-02T01:48:36.073775+00:00