This week’s newsletter describes a proposal to make statechains deployable on Bitcoin without consensus changes, summarizes a discussion about a schnorr nonce generation function that helps protect against differential power analysis, and links to a proposed update to BIP322 generic signmessage. Also included is our regular section about notable changes to popular Bitcoin infrastructure projects.

Action items

None this week.


  • Implementing statechains without schnorr or eltoo: statechains are a proposed offchain system for allowing a user (such as Alice) to delegate the ability to spend a UTXO to another user (Bob), who can then further delegate the spending authority to a third user (Carol), etc. The offchain delegation operations are all performed with the cooperation of a trusted third party who can only steal funds if they collude with a delegated signer (such as previous delegates Alice or Bob). A delegated signer can always spend the UTXO onchain without needing permission from the trusted third party, arguably making statechains less trusted than federated sidechains. Because anyone who was ever a delegate can trigger an onchain spend, statechains are designed to use the eltoo mechanism to ensure an onchain spend by the most recent delegate (Carol) can take precedence over spends by previous delegates (Alice and Bob), assuming the trusted third party hasn’t colluded with a previous delegate to cheat.

    This week, Tom Trevethan posted to the Bitcoin-Dev mailing list about two modifications of the statechain design that could allow it to be used with the current Bitcoin protocol rather than waiting for proposed soft fork changes such as schnorr signatures and SIGHASH_ANYPREVOUT:

    1. Replace the eltoo mechanism (which requires either BIP118 SIGHASH_NOINPUT or bip-anyprevout SIGHASH_ANYPREVOUT) with a decrementing locktime similar to that proposed for duplex micropayment channels. E.g., when Alice receives control over a statechain UTXO, a timelock would prevent her from being able to unilaterally spend it onchain for 30 days; when Alice transfers the UTXO to Bob, a timelock would restrict him for only 29 days—this gives a spend by Bob precedence over a spend by Alice. The downside of this approach is that delegates might need to wait a long time before being able to spend their funds without permission from the trusted third party.

    2. Replace the 2-of-2 schnorr multisig between the trusted third party and the current delegate (using an adaptor signature) with a single-sig using secure multiparty computation. The main downside of this approach is an increased complexity that makes security review harder.

    Several people replied to the thread with comments and suggested alternatives. Also discussed was a previous patent application by Trevethan related to offchain payments secured by a trusted third party using decrementing timelocks and multiparty ECDSA.

  • Mitigating differential power analysis in schnorr signatures: Lloyd Fournier started a discussion on the Bitcoin-Dev mailing list about the proposal described in Newsletter #87 to update the BIP340 specification for schnorr signatures with a recommended nonce generation function that claims to be more resistant against differential power analysis. A power analysis attack involves monitoring the amount of electricity a hardware wallet uses when it generates different signatures in order to potentially learn what private key was used (or to reveal enough information about the key that effective brute forcing becomes possible). Fournier questioned the utility of combining the private key plus the randomness using an xor operation rather than a more standard method of hashing the private key with the randomness.

    BIP340 co-author Pieter Wuille replied with an explanation: in key and signature aggregation where a mathematical relationship is created between the private keys of cooperating users, the attacker—if he’s one of the cooperating users—may be able to combine knowledge of his private key with information learned from power analysis of other users’ signature generation in order to learn about the other users’ private keys. It is believed that this attack would be easier to execute when looking at the power consumption of a relatively complex hash function like SHA256 compared to a relatively trivial function like xor (binary addition). For more information, Wuille links to a discussion between himself and several other Bitcoin cryptographers.

  • Proposed update to BIP322 generic signmessage: after starting a discussion a few weeks ago about the future of the generic signmessage protocol (see Newsletter #88), Karl-Johan Alm has proposed a simplification that removes the ability to bundle together several signed messages for different scripts and also removes an unused abstraction that could’ve made it easier to extend the protocol for something similar to BIP127 proof of reserves. Anyone with feedback on the change is encouraged to either reply to the mailing list thread or to the PR updating the draft BIP.

Notable code and documentation changes

Notable changes this week in Bitcoin Core, C-Lightning, Eclair, LND, libsecp256k1, Bitcoin Improvement Proposals (BIPs), and Lightning BOLTs.

  • LND #4078 adds an estimatemode configuration setting (CONSERVATIVE or ECONOMICAL) which is used to tailor the fee estimation approach when retrieving fee estimates from an underlying bitcoind backend.