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On P2P Transaction Negotiation

One thing that payment to a non-custodial representative service cannot do, is provide P2P payment where negotiation is involved in the structure of the final transaction used to pay whatever is due. 

A basic payment

When a payment is made it involves the spending wallet selecting coins to use, and recipients that they will be give them to. So the wallet constructs a transaction with an input for each coin being used, and an output for each recipient or for each piece of change from the coins that were used.

In the simplest form this is just between spender and recipient.

Options for the spending wallet

The spending wallet can include a wide range of things in a basic payment.

  • It can choose what coins to spend based on an approach that aids in maintaining privacy for the wallet owner.
  • It can choose what value and how many coins of change it makes based on maintaining privacy for the wallet owner.
  • It can add encrypted data that provides context for the transaction, perhaps to be used in the worst case scenario of data loss.

But it can also do a few things that widen the scope of the transaction.

  • It can add arbitrary other data to the transaction for whatever reason, unrelated to the payment.
  • It can pay other parties at the same time as part of a bulk payment, given that as long as the transaction pays any given one the amount that is owed in the way they require, it is irrelevant to them what else is in the transaction.

These might be the only options available for payment to a Paymail address. But payment made in a P2P fashion between two connected parties might have more options.

What of negotiation?

If a payment is made between two connected parties, then the recipient has agency. Their wallet can choose outputs that are sized and constructed in the way that best suits it's hygiene and good housekeeping. These can be provided to the spending wallet based on the current overall state of the wallet or some subset of it, that is related to the payment. They might also be many of the options listed above for a spending wallet that is perhaps paying through Paymail.

But why stop there for the recipient wallet? If the recipient wallet can respond to a query about the outputs it wants attached, then everything is negotiable given a known protocol.

  • Is there value in it providing it's own inputs for the payment to itself, perhaps also for privacy reasons? It could be reasonably argued that this is in the spender's interest as well as this adds to their own privacy.
  • Fee calculations become part of this. Perhaps there is an agreement on who pays the fee. But if multiple parties pay the fee for their own personal additions, then this might be who pays the fee for the complications they ask for and who pays the fee for the overheads for the original payment.  

I expect that this will eventuate for P2P payments, there are likely many use cases for it beyond the ones listed above.

-- rt12

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"If the recipient wallet can respond to a query about the outputs it wants attached, then everything is negotiable given a known protocol." ===> I feel like there's a lot of potential here. What could be some use cases?
electrumsv replied:
Didn't I list some under that? -- rt12
musiq replied:
Oh I see, sorry I totally misunderstood it the first time around, now I understand. "Is there value in it providing it's own inputs for the payment to itself, perhaps also for privacy reasons?" => Would this be kind of like coin mixing? Also, would there be a way for the miner to be a part of the negotiation indirectly? For example, the miner who's connected to the sender wallet may incentivize the sender wallet's user to indirectly negotiate with the receiver wallet to use an output that favors the miner's interest.
electrumsv replied:
A miner is not connected to wallets. If there are incentives for what coins are selected, a wallet will have to weigh them against privacy and other concerns. It will likely be informal rules that wallets can follow. It would appear to be like coin-mixing. But you would never choose to do it to coin mix, you would want to know the identity of the other party so the coins are linked to identity and you can choose to take the risk of interacting with them. Coin mixing in the past is a terrible idea, all it does is allow pedophiles and other criminals to give their coins the appearance of legitimacy and in turn you by mixing yours give yours the chance of being illegitimate and associated with them and their actions.
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I definitely see times where the person requesting payment wants the sender to tell them their identity before hand so they can construct an exact payment request using unspent outputs from the sender's wallet.
electrumsv replied:
My expectation is that both parties making the P2P connection will already know the identity of the other party. The sender will have to announce who they are, and the recipient will be known as that is how you found them. ElectrumSV may very well ignore payments not attached to identity. -- rt12
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