Dave Harding and Mike Schmidt are joined by Maxim Orlovsky to discuss Newsletter #247.

The Bitcoin Optech Podcast and transcription content is licensed Creative Commons CC BY-SA 2.0


Changes to services and client software

  • Descriptor wallet library adds block explorer (36:02)

  • Stratum v2 reference implementation update announced (38:02)

  • Liana 0.4 released (42:35)

  • Coldcard firmware supports additional sighash flags (46:12)

  • Zeus adds fee bumping features (45:09)

  • Utreexo-based Electrum Server announced (48:12)

Releases and release candidates

Notable code and documentation changes


Mike Schmidt: Welcome everybody to Bitcoin Optech Newsletter #247 Recap on Twitter Spaces. Some quick introductions and then we’ll jump in to covering this newsletter. I’m Mike Schmidt, I’m a contributor at Optech and I’m also Executive Director at Brink, where we fund open-source Bitcoin developers. And, Murch wasn’t able to make it today, but the good news is Dave Harding was. So, welcome Dave.

David Harding: Thanks for having me, Mike. So, I’m Dave Harding, I have been the primary author of the Optech Newsletter for the past five years, and I’m also currently doing an update on the book, Mastering Bitcoin, doing a third edition.

Mike Schmidt: Awesome. And, we’re joined by a special guest today, Dr Maxim Orlovsky. Do you want to provide a quick introduction for the folks who may not be familiar with your work?

Dr Maxim Orlovsky: Yeah, sure. So, I’m from LNP/BP Standards Association, which is non-profit, working on developing layer 2 and layer 3 protocols on top of Bitcoin. And one of the main things that we did over the last four years is RGB, which became a smart-contracting layer, or programmability layer for Bitcoin and LN.

RGB update

Mike Schmidt: Well, thanks for joining us, and we can jump right into the newsletter in which we cover RGB, and specifically a post, Maxim, that you sent to the Bitcoin-Dev mailing list. And I know that the newsletter writeup is covering this v0.10 release in your post to the mailing list, and I think we can get into some of the details of that particular release.

But maybe taking a step back, you mentioned that you’re part of the LNP/BP group and RGB is one of the efforts within that group. Maybe you can just provide a high-level overview of what is RGB. I think maybe some listeners are less familiar with it. I know that it’s probably pretty common, that folks have maybe heard of some announcement of RGB a few years ago and maybe haven’t heard about it since. So, what is RGB?

Dr Maxim Orlovsky: Yeah, sure. RGB appeared as an idea back in 2018, or maybe even earlier than that, as a result of cooperation between Giacomo Zucco and Peter Todd, who are well-known in the Bitcoin sphere. Peter Todd proposed a new concept, called client side validation, the whole idea of which was that we need to move, and we can move, a lot of things out of block chain. And by moving a lot of things out of block chain, we can actually increase the scalability and privacy at the same time. Giacomo took that idea and he coined a term of RGB as the colored coins on the LN, which were made possible by this client side validation idea, literally meaning that, “Let’s take the idea of issuing assets on Bitcoin and LN and put it into client side validation paradigm. That’s how RGB was born.

Later, in 2019, I joined the team, and together with Giacomo we created this LNP/BP Association with the idea of bringing RGB into practice. The end result was that already, in 2020, the RGB started transforming into not just colored coin or assets, because nobody was happy about just doing a layer for new shitcoins on Bitcoin, but into a programmability layer for Bitcoin and LN, which may allow advanced forms of smart contracts, and advanced forms of programmability, as well as increased privacy for Bitcoin operations. And we’ve been developing this for years and we’ve had a number of iterations, and that last iteration you mentioned, which went live literally a week ago, allows full-fledged things.

So, anything people are doing on smart contracts on other block chains is now possible to be done in Bitcoin and LN, but without the need of introduction of new tokens. So, many things can be done with pure Bitcoin and LN, which actually wasn’t possible before.

Mike Schmidt: We went through an example in the newsletter writeup, about Alice and Bob and Carol and Dan issuing tokens and parsing them around between themselves, some examples being onchain transfers, and then also in the last example between Carol and Dan doing offchain transfers. Can you maybe enlighten folks, when these tokens are being exchanged offchain, is this using a separate protocol from LN; is it a modified LN implementation; or, can you explain a little bit how that works for me?

Dr Maxim Orlovsky: Yeah, I’ll try. There are a number of things which are separate from each other we need to go through in order to answer this question. The first thing is that all the tokens, and not only tokens, but any one of the smart contract states, because many of the smart contracts, they do not operate with tokens, they have different forms for the state, all this exists on the client side meaning that it is kept by the client the same way as clients keep private keys or wallet descriptors, meaning that if they lose their data, they will lose their assets and they will lose their smart contracts.

So, this is what client side validation is about. Users keep this data and they share this data outside of block chain. But by which means do users share the data? Well, RGB doesn’t care about that as a protocol, it is abstracted from the question of the way how the data is sent from one user to another user. And it is able to work with different ways of sending the data. As of today, we already have at least two of them. One is using some form of relay servers, called RGB RPC; and the other one is based on LN, which allows to share the data through the LN. We have created a dedicated protocol, called Storm, which provides a data layer for LN and it operates on top of LN, and you can do that to send this data in a more decentralized fashion.

Also, we think that it would be possible to share client side validation data through nostr, or other systems, and at the end of the day, they can be sent between users as just the plain files, inserted into emails or chat messages. I hope that answers your question.

Mike Schmidt: Yeah, I think so. I’ll follow-up with something that you mentioned in your explanation, which is these different types of smart contract that don’t involve tokens. So, I think our writeup involved tokens, but also noted that there’s other use cases; I think folks are familiar maybe with colored coins and the fact that you can issue these tokens. What are some examples of use cases that you are excited about that don’t involve additional tokens?

Dr Maxim Orlovsky: I tried to cover the most exciting use cases for RGB in the very last answer in the Bitcoin-Dev mailing list. I will briefly go through that. The most exciting tokenless applications are the following: the first one is the digital identity. In the world of web of trust, one of the main problems which wasn’t fully solved was the procedure of key revocation. There was no way how somebody can revoke his key, and afterwards that everybody is able to instantly see that fact, and also prove that the key was indeed revoked, because if the information about the key revocation is not published, it isn’t possible to detect this fact.

With RGB and single-use seals, which are used by RGB, for now the key revocation becomes fully provable and undeniable, meaning that once you revoke the key, it is known to the whole world and it is also impossible to prove that the key wasn’t revoked. This is for example one of the cases that RGB does without involvement of any tokens or even bitcoin as a coin itself.

Another example might be thought of with DAOs, which are Decentralized Autonomous Organizations also run in a tokenless way. And the DAO being different voting rights, which can be executed by different people, and the difference of this DAO from any other DAO is that with RGB you can prove that the whole history of the DAO operations is unique. You can’t do that with the OpenTimestamp-type systems, because when you do OpenTimestamps, you can create alternative commitments. So, while you can prove that something, some fact, had a place in the past, you can’t prove that an alternative fact hasn’t had a place in the past, because you can create alternative commitments.

With RGB, you can have a whole history of events, which can be proven to be unique without any other alternative history. It uses the same mechanism it uses to provide the double-spending, and the same mechanism is leveraged to create non-doubled histories of events, and that allows a new type of DAOs, which were not possible on the Bitcoin ecosystem before.

There are also many interesting financial applications now around RGB, like the whole area we call Bitcoin finance, which appears from the merge of RGB and LN, together with such things as Storm, which I mentioned before. Here, you may introduce some tokens, but these tokens would be more traditional forms of financial contracts, like options, futures, which are quite crucial for any large economic systems, and you can organize trade with these tokens, including decentralized trade, decentralized exchange, creating derivatives or basing of different forms of smart contracts, and doing things like automatic market-making and crypto-collateral-based derivatives.

So, that’s quite a lot of things which may happen due to RGB.

Mike Schmidt: It’s a bit fortuitous that we have Dave Harding, who’s joined us today, as not only did he do the writeup for the newsletter on this topic this week, but he also engaged in the mailing list discussion. So, Dave, I’ve monopolized the questions so far; perhaps you have some clarifying comments and questions for Maxim?

David Harding: I’m just here to learn. I guess one question I have for Maxim is, one of the things I noticed looking through your code, at least the code from the LNP/BP Association, and I may be looking at the wrong code, is that you guys use Electrum backend a lot. And when I was thinking through the protocol, it seems to me that it’s something that requires random access to the entire block chain.

So, a traditional Bitcoin wallet can use something like an Electrum backend and it’s really convenient in that case. That way, it can go and just ask the Electrum Server to give it any output from any previous transaction, and I’m saying this for the listeners, I know Maxim knows all that stuff. The downside of that approach is that the person who runs the Electrum Server has to go through the entire block chain, has to maintain a copy of the entire block chain, has to build a very large index of every output in the block chain; and over time, as the block chain grows, there’s just more and more data that they need to store, their index gets bigger, they need a beefier server.

One of the things that Bitcoin developers, when thinking about the regular onchain protocol, have done is try to make sure we continue to design a protocol in a way that we don’t depend on something like Electrum servers. So, a self-custody wallet today can use something like BIP157, 158 compact block filters, and they can just grab these small filters for the entire block chain and they can find which block contains a transaction they have. And those other things that they can do suggest minimizing the amount of data that they need. And any wallet that scans to a block can just lose that block, so a pruned full node can have a wallet without storing any historic block chain state.

So, one of my questions here for Maxim is, when I look at the RGB protocol, it feels to me like it might depend, or at least certain applications depend on having random access to the entire block chain state. Is that actually a requirement or am I just making that up; and what are the implications for the scalability of the protocol?

Dr Maxim Orlovsky: Thank you very much for looking deep inside the code actually on the writeup that you’ve done, I think it’s great. You were able to explain things in more simple words than I was able to. Now specifically to your question, no, RGB do not depend on Electrum. It is true that the current library they default to, Electrum implementation, why? Well, because it’s the most commonly used infrastructural thing, but the whole code of RGB is abstracted from a specific, we call it transaction resolver, through the interfaces, and RGB does the verification interacting with the transaction resolver provided by specific wallet implementations, such that the user has the ability to change the transaction resolver.

Technically, the information we need from Bitcoin block chain can be provided today by three main backends: Bitcoin Core itself, or any alternative coin implementation that exposes Bitcoin Core RPC API; Electrum Server; as well as a modification of Electrum Server, called Esplora, made by Blockstream, which provides HTTP interface as well, which is more efficient than the usual Electrum interface.

We are also working on a thing called BP Node, Bitcoin Protocol Node, which will be a new type of indexer capable of providing much faster responses to the requests from wallets on both Bitcoin-related things, LN-related things and RGB-related things, such that for instance you can ask this backend to monitor a specific wallet descriptor, which includes some complex miniscripts, timelocks, and so on, and it will be updating you about new transactions happening to that descriptor.

However, BP Node, it’s a rust project, it’s still a work in progress, so it’s not been released. But potentially, it will be one of the best ways of being a backend for] block chain indexers for RGB as well.

David Harding: Okay, so just to follow up, and I know this is not super-important, I’m just curious here and we have you on the line, so I’m thinking about one of your recent emails, you had these things called state extensions you were describing, that are kind of disconnected from other contract states. They’re published on the chain, or they’re committed to onchain, but they’re disconnected, I believe, from the rest of the contract state. And in the example we were talking about on the mailing list, we have a party who needs to do a proof of publication, that they were the first to find a result. So, they need to publish something onchain to establish its time point, if you will, when it occurred that they were the first to do this.

It just seemed to me from that perspective that a later client, who needs to go back in time and validate the history, is going to need to look through the entire block chain to see if anybody else published something first. And for that, I think you would need complete access to the block chain. And for it to be fast, when the block chain is several hundred gigabytes, you’d kind of need this random access. Am I missing something; is this just because it’s a special case, so most RGB wouldn’t need to do this, but in a special case you might need to do this? Could you help me think through this?

Dr Maxim Orlovsky: Yes, sure. Let me start with state extensions. State extensions are the way how an open public unknown set of participants may participate in an existing RGB contract. Their introduction allowed us to move from the concept when only existing, pre-defined set of participants participate the contract into an open set of participants, which may be important for the cases which you mentioned. And in fact, these state extensions are disconnected from block chain; they do not require any onchain event to happen. However, anything produced with the state extensions are not final until one of the contract participants has included the state extension produced by somebody else into the history of the contract; and by doing this inclusion, basically linking it to block chain state.

The second part of your question is actually unrelated to state extensions, and it was that you can construct RGB contracts which use onchain events as a way of signalling something. And this is actually because in my reply, it was put together with state extensions, but in fact these two things aren’t connected; you can have onchain signalling without state extensions as well, and you can have state extensions without any form of onchain signal. And yes, you’re right, that onchain signalling may require random block chain access.

But the reality is that it is up to the contract creator and developer to choose a specific form of onchain signalling. RGB at its consensus level doesn’t require onchain signalling and doesn’t provide a default way of onchain signalling. Thus, it will be up to the contract creator to select a form of onchain signalling which will be efficient in terms of both speed and time, otherwise this contract wouldn’t be used much by the users, because it will be slow or not working with the Electrum backend.

So, with this BP Node, I was mentioning of course one of the things we will be providing is more efficient block chain indexes which allow this random block chain state access. And with this, probably a thing we could fast-forward updates to RGB; it’s a way how you can introduce new functionality into RGB protocol. We will have more functions which allow introspection of the Bitcoin block chain. Also, the current version, v0.10, there is no random block chain access in RGB allowed. However, with one of the future updates, the random block chain access will come, which will enable this form of signalling, and the specific forms which will come will depend on our progress with the BP Node and efficient block chain indexing.

David Harding: That answers my question very well, thank you. Mike?

Mike Schmidt: So, the announcement from the mailing list talked about this v0.10 release. I think a lot of this discussion on RGB, at a high level, is important for folks, but I also didn’t want to miss anything that you thought was notable for folks about this v0.10 release at a high level, so maybe give an opportunity to tell folks what’s updated and what they should consider if they’ve used previous versions, etc.

Dr Maxim Orlovsky: Yes, sure. V0.10, probably one of the largest changes in RGB, which we’ve been working on for more than half of a year, and it also includes some functionality which we thought and contemplated for several previous years. Specifically, this release allows a thing we call interfaces. Interfaces fully abstract the functionality of the smart contract such that now, when you have a wallet supporting RGB and somebody does a non-standard smart contract, the users of the wallet do not need to update their software to use a new kind of smart contract. What they can do is that together with the contract, they import an interface and implementation of the interface created by the contract developer, and now their wallet supports new forms of the contract.

So, it allows you to do very advanced stuff, not being blocked by the vendors, by the wallet developers, by us as an association defining some sort of standards. Any independent developer can do whatever they like with RGB without asking permission, filing a standard, or talking to wallet developers. And it will be up to the end users, who will be installing this contract, reading who did this; and if they trust the developer, they can plug in this interface thing.

Other very important news is that now you can write RGB smart contracts in rust, and you have access to a rich type system. The state of the smart contract can be any complex data type you can write in rust, and then you can compile this data type into your smart contract. I think this is also quite a huge step forward. We are working on a special programming language, called Contractum, which is a Haskell style functional language to programme RGB smart contracts. But the compiler is not yet released and before this language is created, actually writing smart contracts in rust is the main way we assume smart contracts will be written.

There is another one which you can use at low-level assembly, called AluVM assembly, but this is much harder than rust, so probably rust was quite a big innovation.

Mike Schmidt: One follow-up question. So, we talked about this latest version, we talked about the history of RGB; can you comment briefly on the RGB project’s roadmap, maybe just a few things that you’re looking forward to and near-term releases?

Dr Maxim Orlovsky: Yes. RGB is made in layers. So, the main layer of RGB is the consensus layer, which we tend to move towards specification, so less and less things would happen with the consensus layer. And the thing that is released in v0.10 is the most stable release we had so far. There are not many things going to happen there, but for sure some of them will be evolving in the future, including the one that we already mentioned, which is random block chain access. There will be also an access to the state of the LN channels, and there will also be a more advanced use of zero-knowledge proofs, including Bulletproofs++, rangeproofs and including potentially zero-knowledge-based compression of the history of the contract.

That’s pretty much everything that may happen in this layer, and the main innovation with RGB would be happening on the layer above, which is a standards library and wallet integrations, where we plan a tool chain for the developers. And the most exciting things there are first more deep and advanced integration of RGB with the LN, which will allow doing many, many things not possible before. This also requires some changes and improvements to the LN protocol itself, we are working on them, and they are naming this extended version of LN protocol Bifrost.

It is important to get things like multi-peer channels working. We also work on channel composability, such that you can construct channels inside channels inside channels. That is more than channels factories, because the structure of the channel itself will be composable of different components, like you can add discreet log contracts (DLC) outputs to the channel, or you can use non-standard type forms of outputs and so on. So, it’s a standard protocol that adds this composability to LN channels. Combined with RGB, it will allow multiple channels, which can operate in a very fast and efficient way with RGB smart contracts offchain, not requiring mining transactions for those complex operations.

Another thing we are excited about is this Contractum language and Contractum compiler, which should help people to write RGB contracts and start exploring this new world. And the very last thing that is worth mentioning is that in a very long-term perspective, it would take years for sure from now, we are working on the creation of a new layer 1 medium; I don’t want to call it block chain because it’s not actually a block chain anymore. It’s a way how you can run client side validation with a layer 1 in the most efficient way, where instead of block, you have one signature which includes a lot of commitments. And of course, this layer doesn’t feature any coin, any cryptocurrency, nothing of that sort.

With that, as I described in my latest reply to Bitcoin-Dev mailing list, it would be possible for RGB to operate both on Bitcoin and this new medium, such that Bitcoin can be lifted or moved into RGB from the mainchain, and operating on the new medium with this client side validation, which will unlock much larger scalability that is possible with block chain, or even with the LN today.

Mike Schmidt: Dave, any follow-up questions before we move on?

David Harding: I just wanted to see if Maxim wanted to provide a little bit more detail on their plans for confidential transaction-based amount blending, because I thought that was actually really clever when I read about that, how they’re going to use that to improve privacy.

Dr Maxim Orlovsky: That’s already used. So, what we are using is we are using this technology developed by originally the Blockstream guys, which is confidential transactions, where we use Pedersen commitments to hide the amount of the asset. Together with the Pedersen commitment, we have to use a rangeproof, so we stick to bulletproofs. It was in RGB until this version.

In this version, for now we’re temporarily not creating bulletproofs, and we still use Pedersen commitments, but the data are kept in the explicit amounts such that when a new bulletproofs version, which is Bulletproofs++, will arrive, we will be able to pack the history and blend all past data with this new Bulletproofs++. So, that will be one of the next updates of RGB.

We are waiting for Bulletproofs++ to be finished, because they are not finished in the implementation, it’s just a paper which is being implemented by Blockstream as of today. And when that implementation would be completed, we will be able to migrate all existing smart contracts on the use of bulletproofs, and the confidential transactions will become the default way of parsing amounts around, and also they will be applied to all historical data as well.

David Harding: Yeah, so I thought that was really cool, when you have one party giving a future party the past date. They don’t have to tell the future party anything about the specific amounts transferred in the previous states. So, if Mike gave me some tokens or some lifted BTC and I gave it to Maxim, Maxim would have no idea how much Mike and I transferred. Maxim would still be able to do a full validation of the client side validation of the previous state transfer to make sure everything was correct, but he wouldn’t learn any of the amounts. I thought that was really, really awesome.

I have one last question, and a kind of general question for Maxim, which was when you’re working on an RGB contract, how much do you need to be aware of how the protocol works at the base layer, so the Bitcoin protocol? I’m thinking kind of in comparison to say an Ethereum developer writing a contract in Solidity, and not really thinking through everything, so their contract is exploitable by a miner’s trackable value, or these other things that happen in Ethereum, because you think the entire contract is the code that you’re writing in Solidity, or whatever.

If you’re writing an RGB contract, do you need to be very aware about how UTXOs happen on Bitcoin, how reorgs happen on Bitcoin, what miners do for transaction selection; or, when you’re writing an RGB contract, can you just write the code and as long as your code is good, it’s going to work? What’s your take on that, Maxim?

Dr Maxim Orlovsky: One of the things we’re constantly thinking about is not to repeat Ethereum’s story and not to create Ethereum 2.0 on Bitcoin. Well, time will show if we have succeeded in that or not. Of course, I think it’s impossible to do a system which is absolutely safe, such that somebody dumb or with bad intentions wouldn’t be able to do something wrong with that; I think nobody is protected from this. However, what we tried to do is that, as you asked, when you develop RGB contracts, you don’t have to think about reorgs and low-level things in Bitcoin block chain itself. They’re fully abstracted and the system operates in the same way for all the smart contracts, so all the validation of onchain data is performed exactly the same and you don’t program that part.

Another thing that we did to improve the readability and make recording more simple, is that we have these languages that we are developing, they are functional style, meaning that they’re more declarative rather than imperative. And when you use a declarative model of programming, it’s much harder to do something wrong.

The last part, which is very important, is that we very clearly define the concept of ownership of the state or the date. One of the main pitfalls of Ethereum is the use of an account-based model, such that when you write a smart contract, you must always make sure that you check who is the owner and who has the right to perform and execute that or that operation, and how this operation should happen. And people are frequently forgetting about making these checks, or making them in an improper way.

With RGB, you are not worried about that, you don’t do that because everything is linked to the UTXO, and the UTXO actually defines who is the owner, and only the owner has the right to perform operations, and that right is not checked by RGB itself, it is checked by the fact that you are able, as an owner, to spend that UTXO with a Bitcoin transaction. So, in this way, we’re just literally leveraging the existing Bitcoin as a state-ownership system, not reinventing the wheel and not doing anything of the sort that Ethereum had to do with this account-based model. So, this is the good point.

The bad thing about that is that of course it requires a huge product change when you try to develop something with RGB. You can’t just come from Ethereum and Solidity world and write RGB contracts, because it’s not that you can’t cross-compile Ethereum to RGB, even more you can’t develop the contracts using the same paradigms that are used to develop contracts in Ethereum. So, that’s one of the reasons why people frequently say that something is not possible with RGB and will try to apply the same logic of Ethereum to RGB and Bitcoin. Of course, it wouldn’t be possible because with that logic, it is not possible by definition.

However, it is possible if you change how you see the state management, the smart contracting, and when you move to a new programming paradigm, many things become much simpler but they don’t require a lot of effort, like in Ethereum. Many cases, when in Ethereum, you need to create a token; here, you don’t need to do that. And where in Ethereum, you need to control the access rights, here you don’t need to do that, and so on and so forth. So, that’s probably the recap of programming on RGB.

David Harding: Thank you.

Mike Schmidt: As we wrap up here, Maxim, if folks are interested more about RGB and potentially contributing, and maybe even potentially donating to the project’s efforts, where would you direct folks?

Dr Maxim Orlovsky: Well, I think the main place to read about the technology is rgb.tech website, which we will be keeping updated. Of course, the best place to contribute and to go deeply is GitHub, RGB-WG, workgroup organization. There is also a way to donate through GitHub, but GitHub takes its share. Another option is just to connect to us, send an email to info@lnp-bp.org, and we will provide you a BTCPay Server address and stuff like that. So, the best way to contribute, go to GitHub; the best way to learn, go to rgb.tech.

We will also be releasing a whitepaper we called blackpaper as a joke, because comparing to existing whitepapers, it doesn’t offer any token, it doesn’t contain a lot of marketing information, and is very focused on the confidentiality. So, that’s why it’s a blackpaper, which would be probably the main resource, once it’s released, to learn RGB in-depth before starting to contribute to the codebase.

Mike Schmidt: Well, thank you, Maxim, for joining us to explain this news item and all things RGB. Hopefully, we can keep you on for just a minute longer, as I think this next update does involve some work that you or your team has done. So, if you hang on for just one more minute, we can get your comment on that.

Dr Maxim Orlovsky: Sure.

Mike Schmidt: The next segment of the newsletter this week involved our monthly feature on changes to services and client software, where we look around at the ecosystem and see what wallets or services or libraries are implementing interesting Bitcoin technology that we cover on the Optech website.

Descriptor wallet library adds block explorer

The first entry is descriptor wallet library adding a block explorer, and coincidentally descriptor wallet library is affiliated with some of the work that Maxim has been doing. It’s a rust descriptor-based wallet library that builds on rust-bitcoin and supports a bunch of cool Bitcoin tech, including descriptors, miniscript, PSBTs, and in the most recent couple of releases, a text-based block explorer. Maxim, maybe you can briefly explain descriptor wallet library and the block explorer that was recently added?

Dr Maxim Orlovsky: Yeah. Descriptor wallet library is the library we did at LNP/BP Association, so we had basically three main directions: Bitcoin implementations of libraries; LN implementations of libraries; and, RGB. It was created to be used by RGB and LN implementation we also had, and this new version, it brings ability to parse separate specific control blocks, because we found out that it is impossible with any existing Bitcoin explorer today, including mempool, to look into the witness data of the taproot path script spendings. And for developers, it’s quite crucial to understand what’s in there.

This comment line too is pretty simple in terms of user interfaces, but what it allows you is you just parse the transaction ID and you can look into taproot witness details, which can be very helpful for those who work with taproot.

Mike Schmidt: Dave, any questions or comments?

David Harding: No, that just sounds like an awesome feature set. The way I’ve been doing that is just by hand-parsing the hack, so it will be very nice to have a tool to do that for me.

Dr Maxim Orlovsky: Glad to help.

Mike Schmidt: Maxim, you’re welcome to stay on and comment on the rest of the newsletter as we go through it, but if you have things that you need to do, you’re free to drop as well.

Dr Maxim Orlovsky: Thank you, I’ll stay online.

Stratum v2 reference implementation update announced

Mike Schmidt: Next change to client and service software that we noted this month is Stratum v2 reference implementation update announced. We haven’t discussed Stratum v2 too much on this show previously, so it might make sense to give a quick overview of Stratum v2’s features.

So, there’s a Stratum v1, which is essentially a protocol for facilitating communication between miners and mining pools, and that v1 has been out for a long time, and there’s this v2 that is being worked on currently. Some improvements for v2 include that the v2 is actually a more standardized protocol when compared to Stratum v1. Stratum v1 was less precisely defined, and it resulted in different implementations having semi-compatibility with one another, so v2 helps tighten that up a bit.

A second feature is one that probably most people are excited about when they hear Stratum v2, which is the ability for an individual miner within a mining pool setup, as opposed to just the centralized pool operator, being able to select transactions to include in the candidate block. So, I think that’s what most people are excited about, but there are some other improvements as well: default encryption and using the Noise protocol authentication for protection against man-in-the-middle attacks; there’s some performance improvement, including data transfer optimizations; and finally, v2 is being rolled out in a flexible way, allowing a variety of different configurations, including involvement of Stratum v1 mining devices to be able to participate in certain v2 Stratum setups.

The latest post, which is the one we highlighted in this segment of the newsletter, is about a new Stratum v2 reference implementation, and that includes the piece that I mentioned previously a minute ago about individual miners’ ability to select the transactions that would go into a candidate block. So, if you’re a miner or part of a pool or a firmware maker, you should be looking at this and be being able to provide some feedback to the project, because they note in this post that feedback will, “Have a high impact on the development direction”. Dave, any thoughts on Stratum v2 and this reference implementation?

David Harding: Well, you can put me for one of the people who just loves the idea of enabling miners, the people who actually provide the hashrate, to choose the transactions that are being included in the blocks, not leaving that to a pool-level decision. And one of the things that is really nifty about that, that I don’t hear often much, is that it may actually slightly improve the pool’s profitability.

One of the reasons for that is the miner who finds a block in the existing protocol, where they don’t choose the transactions, they have to send the winning hash back to the pool, the pool has to add that to the block template they created, and then the pool broadcasts out that block. Whereas, if the miner is running a local a node and they’re using Stratum v2, when they find that winning hash for the block, they can broadcast that block directly.

They also send the hash back to the mining pool, and the mining pool does all the things I just described, but the miner who finds the winning block can be the first one to broadcast it; it removes a little bit of latency. We’re talking for a typical miner somewhere between 50 and 100 milliseconds probably, maybe a bit less. But that’s a somewhat significant amount when we have an average of 10 minutes between blocks; you can do the maths. I think it will improve profitability by maybe 0.01%, somewhere around that order. But it’s something when a block is worth $50,000, or I don’t know what they’re worth now; $100,000.

It’s just really nice that miners and pools have worked together on this and that there are people out there sponsoring this, like Square, etc.

Mike Schmidt: Thanks for adding that point, Dave. That’s something that if I had heard about it previously, I don’t recall that, so it’s an interesting additional benefit.

Liana 0.4 released

The next piece of software that we highlighted in this month’s coverage is Liana 0.4 being released. We covered the 0.1 and 0.2 releases previously, and to just give a quick recap of what Liana is, it’s wallet software that features a recovery key. And so, the typical case for this might be if you lose access to your keys, for whatever reason, you can have some sort of a fallback for that that includes a timelock, so that if that’s a different set of keys, that that group of people cannot move your bitcoins until some sort of a timeout has been reached.

They’ve been iterating on this approach for the last few releases, and this 0.4 release allows the possibility to configure additional timelocked recovery paths. So, an example from the blog post that we linked to would be, “Let my funds only be spendable by myself for one year and if they don’t move for a year, let them be spendable by my spouse and children, along with an attorney. Then, after a year and three months without the funds moving, let them be spendable by my family alone”. And the Liana team notes in the writeup that that would obviate any potential attorney that is non-compliant or inaccessible or malicious, by having a second fallback to just have the family be able to move the coins after an additional timelock. So, that’s interesting. Dave, did you get a chance to look at the Liana release?

David Harding: I did not, I just quickly skimmed the notes while you were talking. One of the things that I would quickly mention here, which is not Liana-specific, but as the ecosystem rolls out support for descriptors and miniscript, it’s going to be a lot easier to make these policies portable from one wallet to the next. So, you’ll be able to have a tool, like Liana, that helps you choose these policies, helps you build these policies with a nice user interface, etc, and then you’re going to be able to copy that into a different wallet. And those wallets might share a path, or they might not share an HD path, they might be completely separate, but I think that we’re looking at a future where we’re going to have more access to these sorts of simple policies for defining how to use your coins, and it’s going to make everything so much more robust when it comes to the security of your bitcoins and safety of your bitcoins, across life events.

Zeus adds fee bumping features

Mike Schmidt: The next notable software release was Zeus adding fee bumping features, and this is in Zeus v0.7.4, adding fee bumping using both RBF and CPFP, and that includes for regular onchain transactions, but also including LN channel opening and LN channel closing transactions. This update includes a lot of the plumbing for a bunch of different backends, but the first implementation here being LND. And I messaged Evan Kaloudis, who works on the Zeus project, to make sure I understood accurately what was going on, and he confirmed that typically this fee bumping uses RBF, but it can also use CPFP in certain situations. So, there’s some logic and flexibility in these fee bumping scenarios. Dave, any comments?

David Harding: Fee bumping is great, it’s something that we need in the future. Did we skip the Coldcard update?

Mike Schmidt: Yes I did, unintentionally, and of course Rodolfo’s here and I’m embarrassed!

Coldcard firmware supports additional sighash flags

Yes, the Coldcard firmware supporting additional signature-hash (sighash) flags. So, to set the stage, a sighash flag is something that you can use to indicate which part of the transaction is signed by a signature. Most typically, SIGHASH_ALL is the sighash flag that’s used, which is, “Sign all inputs and outputs”. But Dave, maybe I can throw a question to you: what’s an example usage of a sighash flag that isn’t SIGHASH_ALL?

David Harding: There’s two other main flags, one is SIGHASH_NONE, which by default, if I recall correctly, only signs the input to the transaction, it doesn’t sign any of the outputs. Then there’s SIGHASH_SINGLE, where the signature only covers input that adds it and the corresponding output. So, if you use SIGHASH_SINGLE on the second input, it also covers the second output. And there’s a modifier, called SIGHASH_ANYONECANPAY, which just makes this all more complicated.

A SIGHASH_SINGLE is really interesting, and it’s something that they’re actually using in LN right now. What you can do with it is kind of do multiple transactions together. So, you have an input that, let’s say, contributes 1 bitcoin to a transaction, and you expect to receive 0.9 bitcoin in change. Well, you’ll just make sure your input and your change are in the same position in the transaction, and the other 0.1 bitcoin that I contribute can be spent by any of the other outputs. So, you can take this transaction, you can hand it to somebody else and you can say, “Hey, look, you pay fees”. Now, 0.1 bitcoin is way too much for fees, but you get the idea there, that you can just parse around these transactions and your parts are protected by your signature; nobody can take that transaction and prevent you from receiving that 0.9 bitcoin. But they can also go and add their own inputs and outputs.

Utreexo-based Electrum Server announced

Mike Schmidt: The last piece of software that we highlighted in this week’s newsletter is Floresta, and this is an Electrum protocol-compatible server that uses utreexo on the server side to decrease the server’s resource requirements. And right now, we noted in the newsletter that this software currently is only supported on the signet test network, but I think we can breakdown a couple of pieces of the technology that are in this project, the first being utreexo, which is an alternative to storing the entire UTXO set, and instead you store a merkle tree that’s updated after each block. That has some significant decreases in the amount of disk space needed to run a node. So, this project has married utreexo with the Electrum protocol that we discussed a bit earlier, which is a client server protocol that allows lightweight wallets to connect to a server that can provide information that supports that light wallet’s operation.

Something notable from the blogpost that introduces this project is, it sounds like they initially set out to create a node that also included a wallet, but realized that there’s a bunch of work and overhead with creating and maintaining a wallet, and instead decided to create a utreexo-based Electrum Server, and then let folks use whatever wallet they wanted that could speak the Electrum protocol.

The project also noted that it required significantly less disk I/O and disk space, even more so than a pruned node using Electrum Personal Server. And another thing notable from their blogpost is that they noted if you’re okay with the trade-offs of assumeUTXO you can actually have assumeutreexo full node running on your smartphone. So, I thought that was interesting. Dave, what are your thoughts?

David Harding: I think I should have clicked on this earlier. I’m a little confused how it works, but I think this could be a really nice thing. So, it looks like it’s kind of a replacement for, or an alternative to Electrum Personal Server. That’s a little client that you run beside your Bitcoin full node that finds just your transactions using Bitcoin Core, and serves them to you over the Electrum protocol.

So, if you want to run a full Electrum Server, as we were talking with Maxim earlier, or something like Electrs, or whatever, you have to build this really beefy index. I think your Bitcoin Core client plus your Electrum Server, you’re probably looking at at least 1 TB of data, maybe it’s 2 TB now, I don’t know what it is. With an Electrum Personal Server, you just store the data related to your transactions, so it’s basically the size of your wallet on your full node, so it’s very efficient.

One of the problems with Electrum Personal Server is if you decide to, in your client wallet, load a new wallet that has history going back before the current block, you kind of have to go through the entire block chain again and scan things, and that’s especially painful for a pruned node. But if you have utreexo, you might be able to request out to another utreexo server, they have names for these, I can’t remember what they are, but a data server and utreexo protocol, and they can provide you just the information you need connected to the utreexo root. So, it would be fully authenticated data, your full node will have verified every transaction in its history; you’ll know this data that you’re receiving from the server you’re calling out to is correct and valid, so there’s no S2X fork going on there. But your utreexo-based Electrum Personal Server will be able to serve your wallet data.

Again, I’m a little confused from this announcement exactly how it works, so I’m going to have to look at it in detail, but I think this is pretty cool.

Mike Schmidt: They do mention that when you first connect your wallet to the server, the bitcoin balance will show up as zero, and that’s even if you have bitcoins in your wallet. That’s because this Floresta tool doesn’t keep an address index, like Electrum or Electrs; you actually need to provide the wallet’s xPub to the server to create an index for your UTXOs. But I’m sure there’s a bunch more detail as well in there, so check out the GitHub, check out the blogpost to learn more, but it’s interesting. And for folks who are curious more about utreexo, look back a couple of episodes and we had Calvin Kim on talking about utreexo and some of the details there that could be informative for you.

BDK 0.28.0

Moving on to the releases and release candidates section of the newsletter, we have BDK 0.28.0, which we’ve covered in the last slew of newsletter updates, but this is not an alpha or test release, it’s the official BDK 0.28.0, and we actually had Alekos on, who gave us a great overview of BDK 0.28.0 and some of the bdk-core work that has been going on and the changes to the project as a result of adding that bdk-core functionality to BDK itself, so look back a few episodes. I don’t have the number on hand to get a more detailed breakdown of this particular release.

David Harding: Just to clarify, I don’t believe this release includes the bdk-core update. I think this is still from their mainline branch and it’s just a maintenance release. So, some of the underlying libraries from the rust-bitcoin project changed how they did stuff, and it’s some rust-specific thing that I didn’t look into details for. So, BDK had to put in some bug fixes and to update their version of those underlying libraries; they had to do the same thing as those underlying libraries did, something related to a standard function in rust.

So, this is just a maintenance release. BDK project, I believe, is still working on the release for the bdk-core, changing how they do their modules and stuff, so just wanted to clarify there.

Mike Schmidt: Thanks, David, I was wondering why that wasn’t in the release notes when I clicked in, so thank you for clarifying. I know that is an effort that is underway, and so if you’re curious about that effort, check out that previous chat with Alekos.

Core Lightning 23.02.2

The next two releases that we noted are both Core Lightning (CLN) releases, the Core Lightning 23.02.2, which is a maintenance release that contains a bunch of bug fixes, and if I recall correctly the numbering on these releases has to do with the month and year that it was released. So, this is a maintenance release that is based on that February 2023 release and it’s a bug-fix release. Dave, did you want to jump into any of the details of that release?

David Harding: No, I think it’s just little stuff. If you use CLN, it’s best if you use it as a developer with other applications. Just check the release notes, they’re like five lines, so you’ll be good.

Core Lightning 23.05rc1

Mike Schmidt: Core Lightning 23.05rc1, so back to that numbering scheme, this would appear to be the target for the May release of 2023, and it’s a release candidate for CLN. In digging in, I did not find the release notes immediately, so I don’t have anything to comment on it. Dave, I don’t know if you drove into that at all?

David Harding: Not really. So, just for listeners, I use a policy for announcing pre-releases, you know, release candidates, of not to go into too much detail for stuff unless it’s something that the developers really want tested, that they have a specific desire to have something tested. That way, we don’t steal their thunder from their main release announcement. So, if they want to say, “Look, we just added this awesome feature, but Optech told you about it a month ago”. We don’t want to do that, so we don’t usually go into too much detail.

I think anybody who does want to read the change log, especially if you’re going to go out there and you’re going to test it, it’s in the main directory of the CLN project. So, you just go to the page that has the README, and scroll down the list of files, and there’s a CHANGELOG.md there.

Mike Schmidt: We have three notable code and documentation changes that we pulled out for this week’s newsletter.

Bitcoin Core #27358

The first one is Bitcoin Core #27358, which is an update to the verify.py script. If folks have downloaded Bitcoin Core previously, you know that it’s a best practice to verify the files of a particular release, and there’s been some changes recently in where certain signatures are from prominent Bitcoin developers and other folks, and there’s some improvements to the script to automate the process of checking that. Dave, you did the writeup, do you want to get into some of the nitty-gritty of how this improves verification for folks who are downloading the software?

David Harding: Absolutely, I think this is a very, very useful change. So, in the past, when the Bitcoin Core project released a new version, they put the software up on their website and they had the lead maintainer, Wladimir van der Laan, sign it with a GPG key. So, he would sign a file that had a hash of all the specific files. So, you could download his signature, you could download that file that he signed and you could verify that file was signed by him, and then you could check the checksums on the specific file you downloaded for Linux or for Windows or for Mac, or whatever. And this is how a lot of free software projects give you a verifiable artefact from their project, so you know that it’s actually legit software.

Bitcoin Core goes a step further. They also do reproduceable builds, so multiple people can all build from the same source code and get exactly the same files or have the same hashes, so they’re all going to be able to communicate with each other and verify that the build is good, and that they’re all getting the same thing, and that they can test the software if they want to. But Bitcoin, we don’t really want to put trust in one person. We love Wladimir, he left as lead maintainer, and we have this opportunity now not to put our trust in just one person.

So now, multiple who are doing the reproduceable builds, they’re all signing those reproduceable builds. Those signatures are out there and you can go through and choose the people who you personally trust, or exclude the people who you don’t trust, and check their signatures on each release. But this is a pretty laborious process; you’ve got to download each signature, you’ve got to run a GPG command, you’ve got to download the files, it’s kind of a pain. So, several developers worked together, I believe the final developer on here was Cory Fields, but who else did? Andrew Chow did a lot of the initial work there on writing this script that just goes through and automates everything.

What you do is you tell it the PGP keys of the people you trust. So, if you trust Andrew Chow, you download his key and you tell the script, “I trust Andrew”, and you go and find a few other people who you trust who signed this file. You give that to the program, the program goes and downloads those signatures, it downloads the release files, and it verifies that the signatures commit to the release file. So, it’s a process that you can do manually, but it’s now automated. So, if you’re willing to read through the script, and it’s looks like it’s sensible Python code, you can use it to automate a process that you should be doing anyway.

Again, Bitcoin Core here has now done something nice that it has removed trust in any individual developer, so pretty cool.

Mike Schmidt: And not only can you go to the bitcoin-core/guix.sigs repository and see these Guix attestations for different releases of Bitcoin Core, but you too can also do a build and an attestation and put up a pull request, so that your attestation is also included. I know in the past, developers have been wanting to solicit the community’s involvement in any sorts of attestation; so if you’re feeling geeky, if you will, you can also contribute your attestation.

Core Lightning #6120

The next pull request that we noted this week was Core Lightning #6120, improving its transaction replacement logic, and this is around RBF fee bumping a transaction, and also includes periodically rebroadcasting unconfirmed transactions to make sure they’re relayed. Maybe one in to digging into this PR would be for me to ask Dave, why would we need to be rebroadcasting unconfirmed transactions; isn’t that handled by Bitcoin Core?

David Harding: Alas, it is not handled by Bitcoin Core particularly well, especially if you don’t have a wallet running with Bitcoin Core. And the way CLN does is it doesn’t use Bitcoin Core’s native wallet, it uses its own wallet. So, when you send a transaction to Bitcoin Core, it sees that it already has a copy of it, it makes sure that it’s valid, and then it will relay it to all of its full peer connections, the ones that aren’t blocked-only connections. Then it just sits around in its mempool and hopes that it gets confirmed.

The problem is if you’re relaying a transaction that you created with other local software on your computer and you send it to your peers, well what if those were just a bad set of peers, what if you had just started your Bitcoin full node and you didn’t have any peers; what if something else happened and those peers that received the transaction didn’t relay it to any other peers and the whole network hasn’t seen your transaction?

In the LN protocol, it’s really important to get your transaction out there and get it into a block within a reasonable amount of time. If you’re just sending a regular transaction, your recipient might just say, “Hey, look, I’m not going to give you the goods that you bought until I receive your transaction”, and that’s just not a big problem, you can resend it. But with CLN, you really need to have some mechanism out there doing its best to get your transaction confirmed.

So, this pull request helps take care of both sides of that problem. First, it rebroadcasts the transaction; the current rule they have is to just rebroadcast it every hour. And there are trade-offs there, I think we’ve discussed this in previous letters. The trade-off there is the more you rebroadcast a transaction, the easier it is for somebody monitoring that work to intuit that that transaction belongs to your wallet. The real solution for this is for us to build rebroadcasting into Bitcoin Core directly so that all nodes occasionally rebroadcast transactions, so you can’t tell that somebody rebroadcasting a transaction is behaving any different than other nodes. But we don’t have that yet.

CLN is taking a sensible precaution here and in addition to rebroadcasting transactions, they have also put in some rules for automatically fee bumping a transaction using RBF. Again, LN transactions need to be confirmed within a timely amount of time, and I think if you’re interested in rules for automatic fee bumping, Rusty Russell has put those, I think they’re in a commit message on this PR. So, scan through the commit messages – oh, they’re in the main PR description. I think they’re reasonably well-thought-out rules, even if Rusty uses this weird measurement he calls sipa which I believe most people call, I don’t know, weight units?

Mike Schmidt: Consents?

David Harding: I think this is weight units, but yeah, Rusty is the only person who does this and it makes reading his stuff extra fun! Anyway, there are some rules here; if you’re doing other software like this where you want to do automatic fee bumping, check out his rules, I think they’re well thought-out and they can help you save some thinking time.

Eclair #2584

Mike Schmidt: Last PR this week is to the Eclair repository, #2584, adding support for splicing, both splicing-in, adding funds to an existing channel, and splicing-out, taking funds out of a channel to an onchain transaction. There were some notes in the PR that there are some differences between what Eclair has done and the current draft specification, which leads me to ask, Dave, if you’re familiar, if I’m an Eclair user, am I able to start splicing-in and splicing-out now; I thought that we needed more implementations to be supporting that on mainnet in order for that to be live? What’s the status of the usability of this feature that’s been merged?

David Harding: Well, they have not merged the protocol under the specification, and what Eclair is describing here, like we note in the newsletter, differs slightly from the current proposal, and I don’t believe it’s 100% compatible with what CLN is doing. In particular, one of the things they mention in the pull request, the description is, their words, they said they, “Use a poor man’s quiescence protocol”, whereas I happen to know the BOLT proposal is based on a previous proposal Rusty made for what he calls the STFU – you can figure out what that stands for – quiescence protocol, where a node sends an STFU message that tells other nodes, “Okay, stop sending me updates to this channel, don’t send me any new Hash Time Locked Contracts (HTLCs) until I’ve finished the operation I’m about to work on”.

That’s important in splicing because in splicing, as I think was mentioned in a previous week’s newsletter where you had Lisa Neigut on, in splicing they manage parallel commitment transactions. So, because you have to manage this stuff in parallel, you want to start out from everybody having exactly the same state. And once you all agree on that state, then you can resume the protocol and go back to just doing things your merry way. So, this differs from the specification proposal, it differs from what I believe is currently in CLN, or is in a PR for CLN that Dustin Dettmer, I think is his name, is working on. The difference is not big and I think with this, if you want to run a pre-release version, a non-released version of Eclair, you can open splices with other Eclair programmes.

I don’t think this is gated behind an experimental flag or anything, but I’m not entirely that familiar with Eclair. So, this is exciting, I just want to say that I think splicing is really an important feature for LN, because it just allows you to hide from a user the difference between onchain Bitcoin and offchain Bitcoin. From the perspective of a user, once splicing is widely deployed, there’s just bitcoin; there’s bitcoin that you can send, you have to wait for confirmations; and there’s bitcoin you can send and you don’t have to wait for confirmations, which is still different, but the user interface and the usability just increases massively with LN. So, I’m really happy to see Eclair working on this, I’m happy to see CLN working on this, and I’m just going to be really happy to see this get out there and be deployed.

Mike Schmidt: Before we wrap up for this week, I want to give an opportunity to folks who have any questions for Dave or me, or I see Maxim is still here, on anything that we’ve covered in the newsletter. Feel free to raise your hand or request speaker access. And I will also plug Newsletter #246, both the written version and our podcast recap of it from last week. We did have Lisa on and we talked about not only some of the splicing specification discussions that have happened recently, but also more broadly what’s happening with splicing, what’s the timeframe and what are the advantages of splicing. So, if you’re more curious about splicing, definitely check out that episode as well.

I don’t see any requests for speaker access or questions on the tweet that I can reference, so I think we’re good to wrap up. Thank you to my co-host for this week, Dave Harding, and thank you to our special guest, Maxim, for going through the news item on RGB this week, as well as the commentary on the client and services update section, and we’ll see you all for next week. Cheers.