1. Would this affect physical merchants who accept 0-confirmation, since transaction propagation will be longer and merchant/user might have wait a bit longer while there's queue?
Of course. It will affect the user too. I will not let the payer leave until I see one confirmation if I was the merchant. Hahaha.
You know most physical merchants accept 0-confirmation for small transaction knowing double-spend attempt isn't cheap.
Transaction propagation is very fast and merchants/users wait few seconds to check if there's any double-spend attempt. If double-spend transaction is broadcasted after first transaction, in almost all cases it will be rejected.
2. Would this affect block size/weight limit size increase in future?
I believe yes, the same as ring signatures? Maybe DooMad can confirm.
I don't see the correlation between Dandelion and ring signatures. Could you elaborate?
3. Is using Tor/I2P/Kovri better/simpler solution?
Or take features that help in anonymous transactions in an off-chain solution that Bitcoin already has?
True, but some off-chain solution such as LN still need at least 2 on-chain transaction when open/close channel.
That said, it will obviously be slightly more resource intensive for those choosing to use Dandelion. You'll be maintaining two distinct mempools.
I certainly didn't think that, but since once the transaction is broadcasted to network, you simply move transaction on stempool to mempool. IMO it has bigger impact on computational resource.
With this proposal/improvement, i wonder about these things :
1. Would this affect physical merchants who accept 0-confirmation, since transaction propagation will be longer and merchant/user might have wait a bit longer while there's queue?
No, in 2 ways.
1st way: Transaction propagation using BIP 156 (i.e. dandelion tx relay) will still be very fast in relative terms, so it won't make any difference in the real world
2nd way: Accepting 0-confirmation transactions will be just as risky (and inadvisable) as they are without dandelion
After read the sources more, i agree. But transaction propagation could be longer problem if user don't have any existing privacy graph/"anonymity".
Nice information, dandelion on actual usage would bring lots of interesting information, even though it's improved/modified.
A bit off-topic, looks like Zerocoin-based cryptocurrency currently trending.