13.26. DD26: Refunds and Fees

13.26.1. Summary

This document discusses what should happen with deposit fees when a deposit is refunded.

13.26.2. Motivation

When a user receives a refund, we have to decide what happens to the deposit fee that was originally paid on the associated deposit. Originally, we said that the deposit fee is waived when any refund happens. However, if the refund fee is zero and the deposit fee is non-zero, this results in a problematic scenario where merchants issue minuscule refunds that primarily enable customers to effectively obtain the deposit fee.

13.26.3. Requirements

  • If the refund and refresh fees are zero, it should be possible for consumers to get 100% of their digital cash back on refunds.
  • This should not result in a problematic situation where merchants conspire with consumers and issue minuscule refunds to allow consumers to work around deposit fees.

13.26.4. Proposed Solution

  • Only waive the deposit fee for full refunds where for the specific coin (!) the refunded amount is the total value of the refunded deposit.

13.26.5. Alternatives

  • Only waive the deposit fee for full refunds where for the specific coin the refunded amount is the total value of the denomination of the coin. This may slightly simplify the logic, but has the problem that it does not enable 100% refunds if the original payment already required a refresh because the coin’s value exceeded the paid amount.
  • Waive the deposit fee on any (including partial) refund. This creates a bad incentive structure if combined refresh and refund fees are below deposit fees.

13.26.6. Drawbacks

  • We need to update and test an already complex fee calculation logic.

13.26.7. Discussion / Q&A

(This should be filled in with results from discussions on mailing lists / personal communication.)