Quote from: o_e_l_e_o on Today at 04:42:27 PM

How is the fee paid at the moment? Is it simply as an additional output from the withdrawal transactions? If so, this raises significant privacy concerns as not only will the fees be of common values since both the fee rate and the standard statecoin sizes are static, but you will then have to consolidate all these fees together in to your own wallets, which again will aid in identifying them as coming from Mercury, and therefore identify the coins which were withdrawn as having come from Mercury.

What about a way for a user to pre-pay 10/20/50 whatever withdrawals in advance, much like TrustedCoin do for 2FA Electrum wallets? Both a privacy benefit for the user and a financial benefit for you for not having to consolidate so many small outputs.

The fee is paid as an output in the withdrawal transaction (i.e. the tx that spends the statecoin UTXO). This will be easily identifiable, and we are not trying to hide these transactions, in the same way coinjoin transactions are easily identifiable. Our model is that users should assume that everything the mercury server knows is public, and that privacy doesn't rely on a trusted third party keeping secrets. The privacy in our model comes from the swap protocol, which uses a zerolink-style blinded token system to prevent the server from knowing how ownership has changed in a swap group https://github.com/commerceblock/mercury/blob/master/doc/swaps.md. This privacy model is discussed in more detail here: https://blog.commerceblock.com/bitcoin-privacy-and-tainting-coinjoins-and-coinswaps-meet-statechains-b0d6c1146a24

We initially considered a fully blinded statechain server, where the server is not even aware of the UTXO's involved in deposits and transfers, however this would have been much more complex and involved a much worse UX. This could be a future project though.