@bitfreak! I thought I was done bothering you about withdrawal limits, but another potentially tricky situation occurred to me...

Suppose someone sets the withdrawal limit for an address to the minimum transaction fee.  No problem there, they can raise the limit any time by executing another setlimit transaction and waiting the required 100 blocks.  However, now suppose at some point in the future the minimum transaction fee is raised.  Do you now have an address that becomes effectively burned because its withdrawal limit is now less than the new minimum transaction fee?  Never mind why you would or wouldn't raise the fee, or how unlikely you think it is.  The future is hard to predict, and the goal is to think very long term and to assume that Cryptonite becomes successful beyond our wildest dreams.

We've been referring to this situation as the zero withdrawal limit feature, but after thinking about it some more, it occurred to me that the minimum transaction fee acts like the event horizon for a black hole.  Once you cross that line there's no going back.  I think this situation starts to make the second solution mentioned above look more attractive, because it fixes the problem once and for all and removes the hidden dependency between transaction fees and withdrawal limits.

Just to be clear, and to save you from having scroll back in this thread, the second solution was:  Make it so that the minimum fee is paid for a setlimit transaction regardless of the withdrawal limit.

Another way to think about this is to say that the withdrawal limit simply does not apply to the minimum transaction fee. I think it should also be noted that only the minimum transaction fee should be exempted.  Allowing an arbitrarily large transaction fee to be exempted would potentially provide an avenue for a hacker to circumvent the withdrawal limit.

I would also like to request clarification on your comment about needing to change the protocol.  My understanding is that Cryptonite added the concept of withdrawal limits in the first place (a nice innovation, IMO), effectively making a significant alteration to the Bitcoin protocol (not to mention separating the block chain into three different data structures to implement the mini-blockchain).  So I'm not following why what seems like a slight change in the way you handle withdrawal limits is really a big departure from what you've already done.  I really am asking, so please forgive my complete lack of understanding for how the protocol works under the hood.  I would also appreciate any good reading material you could point me to.