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4/5 Bitcoin and the connection to contracting

By Craig Wright | 21 Jun 2019 | Bitcoin & Blockchain Tech

Bitcoin and remote payments

There are a several contractual issues associated with payments made over the Internet using Bitcoin. There are for example, possibilities of incorporating debates over the applicability of the postal rule. When posting a transaction using Bitcoin, there are several potential moments at of acceptance. These are:

1. The first moment occurs when the signed transaction departs the sender’s wallet which is controlled by the sender. In Internet-based Bitcoin transactions, the transaction cannot be easily recalled once it has left the sender’s wallet outbox. This is a situation analogous to the postal rule. We are not considering cases where a double spend can occur nor the problems that have arisen because of RBF[3] and congestion.

2. The next is the instant of receipt of the transaction at the recipient’s Bitcoin wallet. At this point, the transaction is accessible to the recipient to validate the correctness of, but not to ensure that it will be mined into a block.

3. The next possible instant that could potentially be the moment of acceptance is when the recipient collects the transaction from inside a mined block. At this point, the recipient has received the transaction.

4. Finally, there is an argument for defining the moment of acceptance as the point when the recipient has opened or incorporated the transaction into their wallet.

The additional inclusion of features such as Replace by Fee(RBF) further obfuscate the moment that could be considered the time when acceptance and consideration was completed. Sending a Bitcoin transaction is the digital equivalent of a letter sent through the post. All normal functions of postal mail transpire through transaction propagation. This includes not only the ability to send advertisements or invitations to treat (Partridge v Crittenden [1968]), but also equally offers and acceptances.

It must be remembered that the “question of whether the mailbox rule applies to” Bitcoin “is one that the courts have not yet answered. Its applicability seems to depend on whether Bitcoin is deemed to be more like instantaneous communication than like traditional e-mail services. Unlike real time chat Bitcoin, however, it is probably not instantaneous in the sense of this rule” (Cavazos & Morin, 1994) and the increased ability to double-spend [4] transactions using RBF only increases the argument that Bitcoin is not instant. The removal of the recently introduced RBF code would add a lot of weight to the ability to treat Bitcoin transactions using the postal acceptance rules for 0-conf transactions.

Bitcoin Transactions may be fast, but these are not instantaneous. Failed delivery, rerouting, damage in delivery (malicious malleating included) or simply delayed all arise with Bitcoin transactions. For this reason, Bitcoin Transactions (especially when we include 0-confirmation Transactions), may be argued to most closely mirror a postal letter delivery.