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Bitcoin Optech Newsletter #16: Scaling Bitcoin Special

Oct 9, 2018

This week’s newsletter consists entirely of summaries of several notable talks presented at the Scaling Bitcoin workshop last weekend, since there was very little to report in our usual Action Items, News, and Notable Code Changes sections. We hope to return to our usual format next week.

Workshop summary: Scaling Bitcoin V (Tokyo 2018)

The fifth Scaling Bitcoin conference was held Saturday and Sunday in Tokyo, Japan. In the sections below, we provide brief overviews to some of the talks we think might be most interesting to this newsletter’s readers, but we also recommend watching the complete set of videos provided by the workshop organizers or reading the transcripts provided by Bryan Bishop.

For convenience, at the end of each summary we directly link to its video and transcript (and paper, if available). Talks are listed below in the order they appeared in the workshop schedule.

Warning: the following summaries may contain errors due to many of the talks describing subjects well beyond the expertise of the summary author.

Adjusting Bitcoin’s block subsidy

Research by Anthony (AJ) Towns

This talk makes an intellectual inquiry into whether Bitcoin pays more for security than it needs to—and what we could do if we decided it does pay too much. The speaker makes clear that he’s interested in considering the questions and providing possible answers but that he’s neither suggesting that there’s a problem nor advocating for any solution.

If the Bitcoin userbase did think it was overpaying for security, the talk suggests options for reducing the amount of subsidy paid in the short term as the amount of security increases—but still ensuring that no more than 21 million bitcoins are paid overall in subsidy—potentially allowing the subsidy to last much longer than currently expected.

Although the talk was not about a specific proposal, an example proposal it evaluated was to reduce the subsidy by 20% every time the network’s proof of work security doubles (measured by block-creation difficulty).

videotranscript

Forward blocks: on-chain capacity increases without a hard fork

Research by Mark Friedenbach

One well-known method for soft forking an increase in the Bitcoin block size is extension blocks—a data structure that’s invisible to nodes that haven’t upgraded to the soft fork and so is not subject to their historic limits on block size. By itself, this is an undesirable method for increasing block size because preventing old nodes from seeing the transactions in the extension block also prevents them from being able to enforce any other consensus rules on those transactions—such as rules that prevent a malicious user from spending other users’ bitcoins or from creating more bitcoins than allowed by the 21 million bitcoin subsidy schedule.

However, one doesn’t need to increase block size to increase the amount of data that can be added to the block chain per minute—it’s also possible to increase capacity by increasing the frequency of blocks (reducing the average time between blocks). A method for gaming Bitcoin’s difficulty adjustment algorithm—called a time-warp attack—is well-known among experts and has been used successfully in demonstration attacks against Bitcoin’s testnet and real attacks against altcoins. (Note: although Bitcoin is technically vulnerable to this attack, it’d be a slow attack that would give the userbase a significant amount of time to respond.) By itself, increasing block frequency is also an undesirable method for increasing capacity because shorter block intervals increase the effectiveness of miners with large amounts of hashrate and so is likely to increase mining centralization.1

Perhaps disproving the saying that “two wrongs don’t make a right,” this talk describes a novel way of combining extension blocks and the time-warp attack to allow both upgraded nodes and old nodes to gain the same capacity increase and see all the same transactions for validation while simultaneously slightly reducing mining centralization risk. Upgraded nodes would validate one or more extension blocks (called “forward blocks”) that provide additional block space with a centralization-reducing 15 minute average interval, but the upgraded nodes would also restrict the time stamps in legacy blocks to ensure a permanent (but limited) time warp attack increased the frequency of legacy blocks enough to allow them to include the same transactions that previously appeared in the forward blocks.

videotranscriptpaper

Compact multi-signatures for smaller blockchains

Research by Dan Boneh, Manu Drijvers, and Gregory Neven

This talk describes an alternative to the Schnorr signature scheme described in the MuSig paper that makes use of pairing-based cryptography, specifically an adaptation of the Boneh-Lynn-Shacham (BLS) signature scheme. Although pairing-based schemes require an additional fundamental security assumption beyond those made by both Bitcoin’s current ECDSA scheme and proposed Schnorr scheme, the authors present evidence that their scheme would produce smaller signatures in general, allow non-interactive signature aggregation, and make it possible to prove which members of the set of signers actually worked together to create a threshold signature (i.e. k-of-m signers, e.g. 2-of-3 multisig).

videotranscriptpaper (pre-print)

Accumulators: a scalable drop-in replacement for merkle trees

Research by Benedikt Bünz, Benjamin Fisch, and Dan Boneh

In Bitcoin and other cryptocurrencies, scalable commitments to sets of information—such as transactions or UTXOs—are normally made using merkle trees that allow proving an element is a member of the set by generating a proof whose size and validation cost is roughly log2(n) for a set of n elements.

This talk describes an alternative method based on RSA accumulators that provides potential benefits: the size of a proof is constant no matter how many elements are members of the set, and adding or removing elements from an accumulator can be efficiently batched (e.g. one update per block).

videotranscript

Multiparty ECDSA for scriptless Lightning Network payment channels

Research by Conner Fromknecht

Routable payment channels such as those used by Lightning Network currently use multiple opcodes from the Script language that are enforced by Bitcoin’s consensus rules. Previous work on scriptless scripts by Andrew Poelstra has suggested that some or all of the opcodes currently used could be replaced by Schnorr public keys and signatures that would be created privately (offchain) between the participants in the payment channel. Consensus rules would still require that a spending transaction have a valid signature that referenced a known public key, but none of the other security-related information would appear onchain, reducing data consumption and fees, improving privacy and fungibility, and potentially improving security.

Bitcoin doesn’t currently support Schnorr signatures and no complete design for it has been proposed (although such a proposal may not be far off), so this talk describes proof-of-concept results from a partial implementation of payment channel scriptless scripts that’s compatible with Bitcoin’s current ECDSA keys and signatures. Some impressive savings are achieved in the size of scripts and witness data—savings which increase the number of channels that can be opened or closed in a block and which reduces the amount of transaction fee paid by users of Lightning Network payment channels.

videotranscript

Discussion: the evolution of bitcoin script

A two-hour discussion group focused on this topic mentioned a large variety of proposed changes to Bitcoin’s Script language—far too many to mention here even in summary. However, a few changes were mentioned as theoretically possible to accomplish in 2019 if the community is willing to adopt them:

  • Schnorr signature scheme: an opt-in feature providing smaller signatures in all cases, faster validation, much smaller public key and signature data for cooperative multisigs, and easier compatibility with scriptless scripts. See Pieter Wuille’s proposed BIP.

  • SIGHASH_NOINPUT_UNSAFE: the ability to create spends without explicitly referencing which output you want to spend. Allows creating more efficient payment channels using the Eltoo protocol that also makes it easy for each channel to support up to 150 participants. See BIP118.

  • OP_CHECKSIGFROMSTACK: makes it possible to create covenants that restrict what outputs a particular coin can be spent to. For example, you could put a mandatory timeout of one week on spends from your cold wallet. During the timeout, you could only spend the coins back into your cold wallet. But if you waited for the timeout to expire, you could spend the coins to any arbitrary address. This means that if someone stole a copy of your cold wallet’s private key, you could use this mechanism to prevent them from spending your bitcoins by returning them to your cold wallet during the timeout period. (It was noted that some developers are opposed to enabling the simplest form of this opcode for fungibility reasons, although alternative approaches may be more acceptable.)

  • Fixing the time warp bug: a set of miners controlling a majority of the hash rate can currently manipulate Bitcoin’s difficulty adjustment algorithm to allow them to consistently create more than one block every ten minutes even without increasing overall hash rate. There’s at least one simple proposal to reduce the amount of manipulation possible without breaking older software or mining equipment. See the recent email thread on the Bitcoin-Dev mailing list.

  • Explicit fees: currently fees in Bitcoin are implied by the difference between the value of the aggregated inputs and the aggregated outputs. However, the transaction could alternatively explicitly commit to the fee and allow one of the outputs to be set to the difference between the value of the aggregated inputs and the explicit fee plus all the other outputs. This could be useful for rewarding Lightning Network watchtowers that send breach remedy transactions on behalf of offline users, or it could be useful for fee bumping group transactions.

However, one member of the discussion group suggested that “the only people who have comfort with soft-forks are unlikely to propose a soft-fork and produce software that would be adopted. People are going to fight anything that adds anything, especially considering the recent CVE. People are going to be for the next 6 months significantly more conservative. It’s going to be another 6 months before people are even thinking about it. I don’t think we’re going to get any new soft-forks in the next year.”

(no video), transcript

Special thanks

We thank Andrew Poelstra, Anthony Towns, Bryan Bishop, and Pieter Wuille for providing suggestions or answering questions related to the content of this newsletter. Any remaining errors are entirely the fault of the newsletter’s author.

Footnotes

  1. When a miner creates a new block at the tip of the chain, he can begin working on the next block immediately—but every other miner is still working on an old block until they receive the new block, meaning their proof of work during that brief period of time is wasted (it neither increases network security nor provides the miners with financial compensation). Miners with more hash rate produce more blocks on average, so they get the head start more often and less of their proof of work is wasted.

    For two perfectly fair miners half a world apart, the minimum practical network delay between them is about 0.2 seconds, meaning a small miner far away from most other miners is likely to only be productive for 599.8 of the average of 600.0 seconds (ten minutes) between blocks. A 0.2/600.0 loss of efficiency (0.03%) is probably acceptable, but if the block frequency were increased, the loss of efficiency would increase also: at one block per minute, the loss of efficiency would be 0.33%; at one block per six seconds, 3.33%.

    The small miner could increase his efficiency by moving closer to other miners or even completely eliminate the efficiency loss by merging with them, but this is the mining centralization that it’s essential to avoid in Bitcoin if we want to prevent miners from being able to easily censor which transactions are included in blocks. 

Copyright © 2018 Bitcoin Optech, All rights reserved.


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