Fidelity bonds and their present value

[drufat]

From obwatcher I see that the value of each fidelity bond remains constant over its lifetime, and is computed based on the difference between the time of first confirmation and its expiration date. However, wouldn't it make more sense for the bond value to be variable, and decrease as the expiration date approaches?
Intuitively the present value of the bond should be a function of time left to expiration rather than time from issuance to expiration.

[AdamISZ]

The fidelity bond value calculated by the Taker is indeed a function of current time, see the variable mediantime here:

joinmarket-clientserver/jmclient/jmclient/taker.py

Lines 1001 to 1006 in 050b28d

	def calculate_fidelity_bond_values(fidelity_bonds_info):
	if len(fidelity_bonds_info) == 0:
	return {}
	interest_rate = get_interest_rate()
	blocks = jm_single().bc_interface.get_current_block_height()
	mediantime = jm_single().bc_interface.get_best_block_median_time()

and the call that uses that variable:

joinmarket-clientserver/jmclient/jmclient/taker.py

Lines 1025 to 1034 in 050b28d

	FidelityBondMixin.calculate_timelocked_fidelity_bond_value(
	utxo_data["value"],
	jm_single().bc_interface.get_block_time(
	jm_single().bc_interface.get_block_hash(
	blocks - utxo_data["confirms"] + 1
	)
	),
	bond_data.locktime,
	mediantime,
	interest_rate)

[drufat]

Thanks for the clarification. Closed.

[chris-belcher]

If the fidelity bond value slowly dropped while the coins were still timelocked, it might create an incentive for people to create a second fidelity bond and switch to it as the first one's value slowly drops. It seems to be a less efficient use of capital, because the first fidelity bond would still have timelocked coins that cant move but arent being used (or worse, do get used by the person running a second maker bot)

The reason the fidelity bond value slowly drops after the timelock is passed rather than just becoming zero immediately is to give a lot of time to makers to respend the coin to another timelocked address. Otherwise makers might have to pay a huge miner fee to get it confirmed quickly, which is also a waste.

In case you're not aware, theres a document here which aims to explain every aspect of valuing fidelity bonds: https://gist.github.com/chris-belcher/87ebbcbb639686057a389acb9ab3e25b