[Bitcoin-development] Fidelity bonds for decentralized instant confirmation guarantees

[Peter Todd]

On Mon, Jun 16, 2014 at 01:37:52PM -0700, Daniel Rice wrote:
> True, that would work, but still how are you going to bootstrap the trust?
> TREZOR is well known, but in a future where there could be 100 different
> companies trying to release a similar product to TREZOR it seems like one
> company could corner the market by being the only one that is an accepted
> instant provider at most vendors. It seems to encourage monopoly unless
> there is a standard way to bootstrap trust in your signature.

You can always use fidelity bonds, or as I called it at the time(1),
"Trusted identities":

    Lets suppose Alice has some bitcoins held at bitcoin address A. She
    wants to establish trust in the "identity" associated with the ECC
    keypair associated with A, for instance for the purpose of having other
    users trust her not to attempt to double spend. Since the trust she
    seeks is financial in nature, she can do this by valuing the identity
    associated with A, by delibrately throwing away resources. A simple way
    to do this would of course be to transfer coins to a null address,
    provably incurring a cost to her.

    A more socially responsible way would be for her to create a series of
    transactions that happen to have large, and equal, transaction fees.
    Bitcoin makes the assumption that no one entity controls more than 50%
    of the network, so if she makes n of these transactions consecutively,
    each spending m BTC to transaction fees, there is a high probability
    that she has given up at least n/2 * m BTC of value. This of course is
    all public knowledge, recorded in the block chain. It also increases the
    transaction fees for miners, which will be very important for the
    network in the future.

    Now Bob can easily examine the block chain, and upon verifying Alice's
    trust purchase, can decide to accept a zero-confirmation transaction at
    face value. If Alice breaks that promise, he simply publishes her signed
    transaction proving that Alice is a fraudster, and future Bob's will
    distrust Alice's trusted identity, thus destroying the value needed to
    create it.

    In effect, we now have a distributed green address system.

Note that the second paragraph is seriously obsolete - better to either
use announce-commit sacrifices, or much preferably, simple destruction
of coins. (sacrifice to fees encourages mining centralization for
obvious reasons)

1) "[Bitcoin-development] Trusted identities", Apr 26th 2012, Peter Todd,
   http://www.mail-archive.com/bitcoin-development%40lists.sourceforge.net/msg01005.html

Incidentally, my first post to this mailing list!

-- 
'peter'[:-1]@petertodd.org
000000000000000058ca7ee3a40438ea5a96e499910638352468c6d69abdb226
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