So, it means that the merchant wouldn't be able to make another txn with the bitcoin that I gave him until unless there is at-least one confirmation..?
They can, but it would be a very bad idea. Since your transaction might disappear and cease to exist, then if they choose to spend your transaction, that means that their transaction might also disappear and cease to exist.
kind of..
but what danny is describing as 'bad' is actually CPFP child-pays-for-parent. a future mining pool feature that prompts a mining pool to push the first transaction into the next block by raising the first transactions priority because the second transaction has a generous fee to so that both transactions to be deemed high priority.
CPFP is 'supposedly' meant to attempt to help merchants who receive funds with 0 fee(low priority), to then 'spend' that unconfirmed tx to another address they also own by adding a fee which is enough to make the first transaction a priority and 'hopefully' get the first tx into the next block before the customer tries to double spend.
the downside is that the customer can also use CPFP to do the same thing and pay themselves (double spend) using the exact same tactic. so CPFP is not a guarantee to prevent double spends. but atleast allows a merchant an oppertunity to raise the priority to speed up which block it will get confirmed in, to reduce the chances of a double spend.
but as i said the customer can do the same thing. so its still a case of fastest first and highest fee first winsIf he can do the same thing, then this whole effort is meaningless. If the customer is not going to make a try at double-spend, this would only incur additional expenses (time and money wise), and if he does try (he will obviously try what's best to get there), this as you said won't change a thing
kinda..
at the moment (without CPFP active) if a customer sends zero fee.. a merchant has no tool.. and just has to wait for the tx to get accepted, more often then not tx with zero fee's end up getting dropped off the mempool and forgotten due to not being accepted into a block after many hours.
so at the moment merchants have a 3% change of the tx getting confirmed.
however CPFP makes it high priority.. again not a guarantee the merchant will win the double spend fight against a customer.. but atleast makes it now a 50% chance(more of a fair fight). it also means also knowing the result of winning or losing a double spend fight within 10minutes-1 hours, du to the priority increase each side is fighting.. instead of many hours just sitting there hoping the customer isnt gonna try anything.
all in all a merchant can send funds to himself to prioritise a tx to increase chances and reduce delay of it getting confirmed.., but as danny said, trying to spend an unconfirmed transaction to a third party is silly as its just adding another person into the mix of people that are at risk and could end up getting annoyed should things not go in their favour