It's going to be a great night out downtown with your friends. You figure you'll spend about $100 during the night, so you wisely transfer $200 worth of Bitcoin Cash from your home wallet to the spending wallet on your phone.
The night unexpectedly ends up lasting a lot longer when some friends from out of town show up and everyone insists on showing them a good time. Around 1 AM you're at some bar you've never heard of trying to pay your $35 bill with your Bitcoin Cash wallet only to find out you have insufficient funds. Your wallet only has $34 worth of Bitcoin Cash left in it. What now?
Do you have extra cash in a backup wallet? No? Maybe you can borrow some from a friend? But that's kind of embarrassing, isn't it? How could this have been prevented?
Of course the simplest solution would be to have a second wallet on your phone as a backup for emergencies, either in the same wallet app or a different one. Since people are going to do this anyway, why not make it an optional feature of a single wallet?
The Overdraft Feature
Cryptocurrencies are strict. What do I mean by that? When dealing with physical fiat if you're a few pennies short of a bill you might feel okay with your conscience when leaving that amount and walking out, or a merchant might say that's fine and take the loss of a few cents. In contrast, if you are just one satoshi short on a Bitcoin Cash payment request you'll get an insufficient funds error. It's really all or nothing.
My proposal for an overdraft feature would simply allow users to deposit more Bitcoin Cash into an individual wallet than the amount the wallet app actually displays.
For example, you could deposit 1 BCH into a new wallet and then configure the main page of the wallet app to display 0 (zero) BCH at that amount. If you later deposit $200 of spending cash into the wallet, it will contain 1 BCH + $200 worth of BCH, but on the main page of your wallet app, it would display "$200".
Then as your night wore on and you overspent your budget, your wallet would go into "overdraft"; a negative amount of BCH would be displayed, probably in garish red text. It would still allow you to pay for things normally, which is a key benefit, but now you've got a big fat warning that you're dipping into your emergency funds. Meanwhile you never had to anxiously open up a second wallet app while a server hovers over you, or mumble apologies while fumbling to transfer funds from one wallet to another. You're still using the same wallet to pay because you had that overdraft buffer.
The overdraft amount could be wallet specific, or be the backup cash for all the wallets in the app, or a specific selection of them. Later on at home you could add funds back to the wallet to restore your full 1 BCH buffer, or change the buffer so that "0 BCH" is displayed for that wallet at a lower value.
"Why not just take an extra 1 BCH in a second wallet in your app instead of this overdraft malarkey?" It's true that the benefits of the overdraft solution described in this article are mostly psychological. It's your own money you're using to provide yourself with the "overdraft protection" after all. If you just plan ahead properly for emergencies, you'll never need any of these features. Right?
Most people, however, are notoriously bad at preparing for emergencies. I believe that plenty of users would value a Bitcoin Cash wallet that doesn't go "hard empty" when the balance hits zero, or lets you spend a few satoshis more than what is displayed you have. All without the need to switch accounts, or transfer money from one account to another on the spot. It's about convenience and peace of mind. No one wants to be "that guy" who holds up the line at a checkout with an NSF issue. Banks let millions of people go overdraft (for a fee, naturally!) in their checking accounts every month, so there must be some value to it for users.
Someday you might use a Bitcoin Cash wallet that charges a subscription fee to a third-party "central bank" that will automatically send extra funds to your wallet if what you want to pay for exceeds your wallet balance by a small amount. Until then, in a non-custodial wallet, the "overdraft balance" would be supplied by the user themselves, then hidden on the app's main page; out of sight, out of mind. The actual balance of the wallet would be easily discovered by going to the wallet's details screen.
I believe this overdraft feature would be a small but valuable addition to any Bitcoin Cash wallet. Again, it's about convenience, and the more convenient it is to use and spend Bitcoin Cash, the better!
Great initiative although I'm not sure if it's practical. I would be relaxed knowing I have money even if my account says 0. I'm not convinced it solves the problem you are trying to solve (if it is a problem at all), but have a tip for the effort