I'm reading through the Plasma white paper, could someone elaborate on "free option problem" discussed on page 12? What exactly is this?

Excerpt below:

In smart contracts, there is an issue of the ”free option problem” whereby the receiver (second or last signer) of a smart contract offer is needed to sign and broadcast the contract in order to enforce it – during that time the receiver of the contract may treat it as a free option and refuse to sign the contract if the activity does not interest them.

1 Answer 1


Suppose you and I agree I'm going to buy an ERC20 token from you for X ether. You sign a transaction committing to the exchange, and then I look at the price and realize ether's value has gone up, so I no longer like the deal. I have the "free option" of simply not signing.

Note that I'll sign if the deal has gotten more favorable to me, and I'll refuse to sign if it's gotten less favorable. This gives me an advantage over you because you signed first and thus committed yourself already.


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