Author: David A. Harding 2022-10-23 19:20:41
Published on: 2022-10-23T19:20:41+00:00
In a Bitcoin-dev discussion, Sergej Kotliar identified FX risk as the biggest challenge in accepting Bitcoin payments rather than zeroconf risk, which can easily be managed. The merchant has to commit to a certain BTCUSD rate ahead of time for a purchase, and some transactions lose money to FX, while others earn money, which eventually evens out. However, if there is an easily accessible feature in the wallet to cancel a transaction, it will eventually get systematically abused. One solution suggested by Dave is to address this risk by turning it into a certainty. If the price of BTC increases between when the invoice is generated and when a transaction is included in a block, give the customer a future purchase credit equal in value to the difference between the price they paid and the value of the purchase at confirmation time. However, this means that the merchant will always either break even or lose money on the exchange rate part of the transaction and will need to raise their prices accordingly. While this may not be appealing to implement, it is better to address the incentive incompatibility than hope no large miners ever start performing full RBF. This feature is also compatible with Lightning Network (LN) payments. For instance, a merchant might issue an LN invoice that expires in 10 minutes, and the customer can wait for most of that time to elapse, observe how the exchange rate changes before deciding to pay, obtaining the same American call option. If customers are instead offered a future purchase credit for any gains, they do not suffer any opportunity cost by paying immediately. With LN, it might be possible to have a better UX for this by either refunding any excess or not claiming any parts of the payment, which are in excess, using something like Original AMP or PTLCs. Overall, addressing the FX risk in Bitcoin payments requires innovative solutions, such as offering future purchase credits, to enhance trust and avoid systematic abuse of cancellation features.
Updated on: 2023-06-16T00:52:23.553688+00:00