Good morning Ruben,

> >If the shortened refund transaction exists (labeled "refund transaction #1" 
> >in the SVG) then the same issue still occurs 
> Yes, but there is one crucial difference: at that point in the protocol (Bob 
> has the success transaction and then stops cooperating) Alice and Bob both 
> had the opportunity not to take that path. Bob could have sent the success 
> transaction, and Alice could have waited and sent the revoke transaction. 
> They would essentially be "colluding" to fail.

Okay, so the concern is basically, that Bob misses the deadline, then Alice 
feels obligated to reclaim the funds.
In your proposal, the tx competition is between the secret-revealing success TX 
and the non-secret-revealing revoke tx.
Whereas in my counterproposal, under the same conditions, the tx competition is 
between the secret-revealing success tx and the secret-revealing backout tx, 
and both transactions becoming visible on P2P network means potentially both 
Alice and Bob know all the secrets on the LTC side and end up competing over 
it, RBFing each other until the entire fund goes to miners.

> >Without the refund#1 in your proposal, Bob refusing cooperation after Alice 
> >puts the BTC into lock for 3 days and 2 further onchain transactions
> I'm not sure if I correctly understood what you're saying, but it's as 
> follows:
> Refund #1 can only safely be used before the signed success tx is given to 
> Bob. The cost to Alice at this point if Bob aborts is two on-chain 
> transactions while Bob hasn't put anything on-chain yet.
> Refund #2 needs to be used after Bob receives the signed success tx. The cost 
> to Alice is now three transactions, but Bob also went-on-chain by this point, 
> so causing this wasn't costless to Bob and is thus a similar failure mode.

I think it is not accurate that Bob is already on-chain before Alice can be 
forced to use 3 transactions to fail.

The revoke tx signatures are shared at step 0 of your protocol description.
Thus Bob has a copy of the revoke tx that is valid once Alice signs and 
confirms the funding transaction.
Bob can thus give a copy of the revoke tx with signature directly to its 
favorite miner, forcing Alice to take 3 transactions to back out of the swap.

Since Bob gave the tx directly to its favorite miner (TANSTAAGM: "There ain't 
no such thing as a global mempool"), Alice will only know about this event when 
the revoke tx is confirmed once, at which point it is very difficult to 
reverse, even if Alice has a refund#1 tx prepared.

Bob can do this before step 2 in your protocol description, meaning before Bob 
locks up any funds, so Bob can do this for free, and will even use funds going 
back to Alice to pay for confirmation of the revoke tx.
Because Bob can do this for free, there is no disincentive for trolling Bobs to 
exist whose sole life goal is to just grief possible Alices.

This can be slightly mitigated by adding two CPFP outputs (one for each 
participant) and using the minimum relayable feerate for the revoke tx so that 
Bob is forced to bring its own fees in order to incentivize miners.
This is similar to the "bring your own fees" currently proposed for Lightning, 
but note the recent hand-wringing about the various problems this adds to 
mempools and CPFP and RBF rules and etc etc:

We could use `SIGHASH_SINGLE | SIGHASH_ANYONECANPAY` as well for a 
bring-your-own-fees, but that is not `SIGHASH_ALL` and thus marks the 
transaction graph as special.
And forcing bring-your-own-fees means neither Alice nor Bob can swap all their 
funds in a single operation, they have to keep a reserve.

Bob cannot safely perform step 2 before getting both signatures for the revoke 
tx, as without Bob having access to the rveoke tx, if Bob locks up LTC, Alice 
can stop responding and lock both their funds indefinitely with Bob not having 
any way to recover its funds, which a rich Alice can use to completely lock out 
an impoverished Bob.
But if Bob is given both signatures for the revoke tx before step 2, then Bob 
can send the revoke tx to its favorite miner, forcing Alice to take 3 
transactions to back out, before Bob locks any funds in LTC side.

> I also agree with your observation that alternatively Bob can just spend 
> before the timelock expires.

This seems to be the safest alternative; in my context, where Bob is a CoinSwap 
server/maker, Bob can wait a short while for new clients/takers, and if no new 
clients arrive, spend.
Bob can run multiple servers, each of which are given the completed success 
transaction, and the servers can check that if the timeout is near, to spam the 
Bitcoin P2P network with the completed success transactions.
(these servers need not even run fullnodes, they could just periodically poll a 
number of blockchain explorers and electrum servers, and when the blockheight 
approaches, attempt broadcast; if the "main" server that accepts clients/takers 
has already spent the TXO the broadcast of the completed success tx is simply 
rejected by the Bitcoin P2P network; if the timeout is based on sidereal time 
then the backup servers only need to be running NTP)

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