Mark “Murch” Erhardt and Mike Schmidt are joined by Brandon Black and Dan Gould to discuss Newsletter #264.

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


  • Adding expiration metadata to silent payment addresses (0:51)

  • Serverless payjoin (14:28)

Field Report: Implementing MuSig2 (33:10)

Releases and release candidates

Notable code and documentation changes


Mike Schmidt: Welcome everybody to Bitcoin Optech Newsletter #264, Recap on Twitter Spaces. It’s Thursday, August 17, and we’ll be talking about silent payments, payjoin, some MuSig2, and more with some special guests that we have. We have Dan Gould and Brandon Black. We’ll do some introductions and we’ll jump into the newsletter. Mike Schmidt, contributor at Optech and Executive Director at Brink, funding Bitcoin open-source developers. Murch?

Mark Erhardt: Hi, I’m Murch.

Mike Schmidt: Hi, Murch. Dan?

Dan Gould: Hi, I’m Dan, I work on payjoin. My work’s funded by OpenSats and Human Rights Foundation (HRF).

Mike Schmidt: Brandon?

Brandon Black: Hi, I’m Brandon. Until recently, I worked at BitGo, now working somewhere else that I won’t reveal.

Mike Schmidt: Oh, mysterious. Well, let’s jump into the newsletter.

Adding expiration metadata to silent payment addresses

Our first item is adding expiration metadata to silent payment addresses. Peter Todd posted this to the Bitcoin-Dev mailing list. We actually had Peter Todd on last week and we also had Josie on last week, Peter Todd talking about some policy improvements that he’s looking to get through and Josie talking about the PR Review Club. So, Murch and I are going to leave them be for this podcast, and we’re going to take this adding expiration metadata news item ourselves.

So, to give some background, silent payments is a protocol for static payment addresses. It lets the sender make a payment to a unique onchain address for each payment, even if the receiver only provides the sender with one reusable address. So, one example usage here, the one that at least that I think of most, is a donation address. So you’ve probably seen a static onchain Bitcoin donation address before. All of the donations made to that same onchain address cause some bad privacy. Anyone can see the number of transactional donations, the amounts, where the donated Bitcoins maybe came from on the blockchain. And so that’s not great for privacy.

So instead, if the person wanting to collect this donation online wanted to post a silent payment off-chain address for donations, then each donation transaction would go to a different onchain Bitcoin address, which is much better for privacy. And better yet, there’s no interactivity required for the person sending the transaction and the person receiving the transaction. There’s no need for the sender to, for example, request a new payment address every time they wanted to send a new payment.

A little bit behind the scenes of how that works is, the recipient generates a static silent payment address and shares that silent payment address with potential senders and that can be something posted publicly or you could also send that silent payment address privately as well. And then the silent payment address is not an onchain Bitcoin address. It’s not like a segwit v0 address that starts bc1q or a taproot address that would start with bc1p, but silent payment addresses do use the same bech32m encoding. So, you might see a silent payment address that would have an sp1 prefix, for example. I think the initial silent payments address version would be sp1q. And then there’s additional versioning that we talked about with Josie last week.

So, if you have that silent payment address, now the sender has this sp1q address that they can use, which encodes a bunch of information required for the sender to derive unique onchain addresses for each payment. So obviously, you then get all the privacy benefits and it’s much better than using a static donation address. So, to get to Peter Todd’s mailing list post to the Bitcoin-Dev mailing list, he’s talking about adding expiration metadata to the silent payment addresses. And my understanding of the idea, Murch, is that since the sender is already looking at the recipient’s silent payment address before sending an onchain payment, that potentially we could add in some expiration field to the silent payment address so that a sender would see if the expiration has passed, and then potentially the sender’s wallet software would no longer generate a new onchain address from that silent payment address or provide some sort of warning or something. Did I get that right, Murch?

Mark Erhardt: Yeah, that’s how I understand the proposal by Peter. So, the problem would, for example, come to pass here if you created a silent payment address, then posted it somewhere on an account that you then later stopped using, and it would sit there and you lose eventually access to the underlying private key material that belongs to the silent payment address. And then someone down the road five years later finds that silent payment address on this disused account, still likes the content, wants to donate, and then sends funds to this silent payment address and the receiver never even notices because they lost access to their key material.

To curb this, the suggestion is that the silent payment addresses should always come with an expiration date. There were various arguments made in that regard. There was a response by Josie saying why he doesn’t think it should be at the silent payment layer, but rather a general proposal for Bitcoin addresses. He said that he thinks that the problem generally exists for all Bitcoin addresses. Anyway, there was a bit of back and forth, a few design suggestions how that field could be introduced into the silent payment address. Alternatively, people also discussed that there should perhaps be a revocation system built on top of silent payment addresses, where silent payment addresses are just the building block, and then wallets would have other ways of exchanging silent payment addresses and perhaps exchanging information about when a silent payment address shouldn’t be used anymore. I saw that Brandon also participated in that conversation. Did you want to add something?

Brandon Black: No, just to say that, well, the overall idea of addresses expiring I think is an important one for Bitcoin, whether it’s done at the individual address format or at the exchange layer. I think the Prime Trust incident may have been partially caused by addresses not having expirations on them.

Mike Schmidt: Yeah, I think I read something similar that it sounded like Prime Trust had retired their old wallet system and fired up a new one, except for, I guess, nobody had access to the old wallet system and there was potentially still deposits or whatnot being made to the old system, and that resulted in loss of funds, it sounds like. Is that your understanding, Brandon?

Brandon Black: Yeah, and we don’t know if it was that people were using the old addresses or if they deliberately started using it without realizing they’d lost the keys, but something happened where an old address was reused for significant deposits.

Mark Erhardt: Generally, it seems completely bonkers to me why anyone would ever remove the key material, even if they retire a wallet system. I think that’s one of the big problems with Bitcoin wallets is that you basically need to keep access to any wallet you ever generate, just in case you receive payments to that address or wallet again. But yeah, you got that right, Mike. Essentially, they received funds to expired addresses and then didn’t have access to them anymore. So, yeah, I’m a little on the fence on the expiration date for the silent payments. I do follow the argument that Josie’s making, that it persists generally across the space and isn’t inherent to silent payments.

I think it’s more strongly so for silent payments a problem, because you’re going to post that publicly as a static payment code for people to generate new temporary addresses to you. So, there’s absolutely no reason for you to ever need to remember where you posted it or to go back and update it. So, even if you broadly disseminate your silent payment address and then actually stop using accounts, you may never realize that your old account still occasionally prompts donations. So, I think actually Peter Todd and the others that weighed in have a good point there that perhaps silent payment addresses should be getting an expiration date. But anyway, I think that more conversation will probably be had on the discussion list.

Mike Schmidt: We had a comment from Larry about silent payment addresses just augmenting on this sp bech32 prefix and noting that silent payment addresses are about twice as long as a normal, let’s say, taproot address, just due to the amount of information that’s encoded in that address. Go ahead, Murch.

Mark Erhardt: That’s correct, because it encodes both the public scan key and the public spend key. And so, yeah, it’s roughly 117 characters, I think, instead of the 60, or I think it’s 64 for P2TR. I forgot one more thing, and now you distracted me and I forgot it again. But, oh yeah, right. The problem with having an expiration date on silent payments that I think is the most significant is, scanning for multiple silent payment addresses essentially doubles the cost. Sure, the information that you need about every transaction in order to check whether it is a silent payment to you, that remains the same for checking on multiple, but the calculations and ECDSA operations, the Diffie–Hellman and so forth, you would have to repeat for every separate silent payment address that you make. So having a number of silent payment addresses that you have posted, which would be the case if you have an expiration date on any of them, would mean that you significantly increase the cost for scanning for them.

Brandon Black: I don’t think you have to necessarily change the keys involved. You can make a new version of the address that has an updated expiration without changing the keys, and then wallets could use the latest expiration. Yeah, so I don’t think that’s a major problem. You could even also reuse the scan key, but not reuse the spend key. So, I think the changing of addresses and increasing the scan cost is not a major concern, I think.

Mark Erhardt: Well, if you reuse the scan key, then of course, people would be able to still tie these two silent payment addresses together, which may be one of the reasons why you wouldn’t want to do that, because then you leak meta information about yourself. Otherwise, that would be essentially the same as having another label for the silent payment address; if you’ve read the BIP, that’s fairly at the bottom.

Brandon Black: Yeah. The other thing I wanted to throw in, it was interesting, the early discussion on this BIP, how they originally, I think it was Ruben who originally posted it, and he had talked about using optional scan and key separation, but that got complicated in specification, so they went with always having both keys, so that’s what makes the address always be a very large address.

Mike Schmidt: The details of the silent payments protocol are in BIP352 in the BIPs repository, if you’re curious. And the silent payments team also has some PRs to the Bitcoin Core repository to add silent payments to Bitcoin Core and Bitcoin Core’s wallet, and we spoke about this a bit with Josie last week in the Bitcoin Core PR Review Club section, so check out Newsletter #263 for more details if you’re interested in integrating that with your wallet or service. I know they’re looking for adoption. Go ahead, Murch.

Mark Erhardt: One small correction, BIP352 has a number but has not been merged yet. So if you’re just looking for the BIP, you might not find it immediately. It’s a pull request.

Mike Schmidt: Dan, as a contributor to a privacy project, payjoin, I’m curious as to your thoughts on silent payments.

Dan Gould: Silent payments are great. I think it’s awesome to be able to have a static code to receive things without having that correlation happening or having to run a server. One thing I wanted to add about the expiration was I’ve actually posted to the list, and one way you could solve the problem would be by putting that expiration just in your URI because then it’d be backwards compatible for all sorts of addresses if we wanted to do that. You just put an expiration field, and if the QR scanner doesn’t recognize it, it can either be ignored or you can force it to be enforced by prefixing it with the req as a required field. Yeah, I didn’t get any comments, so I don’t know if it’s just a bad idea.

Mark Erhardt: You mean for BIP21?

Dan Gould: So, you could apply an expiration date on any kind of address by creating a new field that is inside the BIP21. So, you can specify an amount, you can specify a memo, you could also specify an expiration date. And then you wouldn’t need to have every software that parses addresses figure out what the expiration is, you could just update it in the request in the BIP21 libraries.

Serverless payjoin

Mike Schmidt: Thumbs up from Murch. I think we can wrap up the expiration and silent payments news item and move on to the next item of the newsletter, which is also privacy related. It’s about payjoin, serverless payjoin to be exact. Dan, you joined us back in Newsletter #236 and also you were a guest on podcast #236 on our Spaces. Back then, you had posted to the mailing list a “Proof of concept implementation” for serverless payjoin, and now it looks like you have a draft BIP on the topic. Maybe to calibrate the audience a bit, can you give a couple-sentence summary on payjoin as it is in BIP78 currently, and then we can go on to your draft BIP?

Dan Gould: Yeah, I always like to introduce payjoin with some words from the whitepaper, the Bitcoin whitepaper, where Satoshi said that, “Transactions necessarily had some linking between inputs and outputs because the inputs necessarily came from the same person”. And there are a number of ways to break that assumption, but a very common one is with payjoin. So with payjoin, you can have two people contribute inputs instead of just one, and by breaking that assumption it makes it more difficult for someone trying to track your activity on chain. So, that is coordinated with the BIP78 standard, and the BIP78 standard uses HTTP. So, the receiver hosts the server, the sender sends a message to them, and they send PSBTs back and forth to produce one of these transactions that have inputs from more than one person.

There’s more stuff than just privacy you can get from that. It’s also because you can coordinate without using the chain itself to coordinate, you can get kind of transaction overhead reduced. You can have some fee savings because you can combine transactions in a batch in ways you couldn’t if just one person were coordinating a batch, as is done in exchanges today. So, the serverless payjoin changes that requirement where the receiver has to run a server. Instead, a third party can run an untrusted server that can have many receivers allocate resources on demand to make it a lot easier to run in mobile environments, or even for just wallets that don’t run all the time and people that don’t want to manage, always on service, get a TLS certificate, secure it. It’s just a big burden with BIP78.

So, the new BIP proposes that standard and specifies a store and forward protocol to make it asynchronous, and the cryptography and metadata protections around that to make sure that that third-party service is untrusted. And the feedback has been great so far; there’s been lots.

Mike Schmidt: So what information – I don’t want to run my HTTP server, but I want to do some payjoin. So, what information do I need to provide this server that’s sort of doing the coordination on my behalf? What do they know, or what do I need to give them?

Dan Gould: So in the idealized, most advanced version of what we’ve come to, the server should really only know that someone is doing a payjoin at a given time with someone else. We should be able to keep that server from knowing the contents of the message, the size of the message and the IP addresses associated with the message, as long as we’re using a sound modern cryptosystem and something called Oblivious HTTP, which is like Tor if it was a minimum viable product, but well-supported across the internet and web standard, not some custom binary you have to ship in all of your wallet projects separately.

Mark Erhardt: So, okay, maybe I just was spacing out a little bit, but you have this server that provides the meta information about your payjoin opportunity to a sender, but how in the first place do sender and receiver find each other and know that this opportunity exists in the first place?

Dan Gould: Okay, yeah, this is a good point, which is that the requests are made in the Bitcoin URIs, the BIP21s that we were talking about earlier. So, the protocol takes basically three steps. The first one is sharing that BIP21; the second one is the sender contacting the receiver and sending them a proposal, a Fallback PSBT; and the third step is the receiver’s response to the sender of a payjoin PSBT that’s updated that proposal. So, there are really more steps in between because before that request, before the URI can even be produced, the receiver needs to talk to the relay in the middle and let them know they plan on payjoining and to have them allocate some space. That is defined in the protocol as just a message asking.

I think there are DoS considerations that haven’t been completely addressed yet. In the BIP, I just say you can put some sort of authentication token here, but in practice, we may see that change. The reality is also that servers are relatively cheap and all these wallet providers run some services for their clients anyway, and one of these services could be used across many wallets. So, you have that allocation, and then once that allocation exists on the relay, the relay can return the receiver an endpoint that describes that relay. The endpoint is identified by the receiver’s public key, so that the sender can encrypt messages there and know that only the receiver will be able to decrypt them and modify them. And the protocol proceeds from there. The sender shares their key and the receiver is able to encrypt messages to give them back to the sender without the relay being able to see those contents, being able to steal funds, or even being able to unwrap the payjoin, so to speak, itself. The payjoin relay doesn’t get any privileged information about the transaction structure that would break down privacy.

Mark Erhardt: Okay, one follow-up question. So, at what point would the receiver establish the relay for the payjoin? I assume that it couldn’t be initiated by the sender, as otherwise the sender might be able to sort of initiate a lot of payments to the receiver and thus get to know the receiver’s UTXO pool. So, I assume that it is established by the receiver generating an invoice or having a payment request in the first place for the sender, and then immediately establishing the allocation on the relay and the endpoint, and putting that into the invoice for the sender. Is that how it works, how it starts?

Dan Gould: Yes, that’s right. To prevent that attack where the sender would probe the receiver for their inputs, the receiver doesn’t provide any response until it gets a valid fallback transaction from the sender. So, in the worst case, the receiver can always spend the money from the sender without those privacy protections for that sender. So, the sender provides something of value first, and it’s in both the sender and the receiver’s benefit to cooperate. But if they don’t cooperate, they will not reveal the insides of their wallet.

Mark Erhardt: Oh, okay, so the sender basically is providing some initial trust by giving the receiver a self-send, which would of course cost the sender at least a transaction fee.

Dan Gould: It’s not even a self-send. It’s actually, I call it the Fallback PSBT, but it’s a transaction that would pay the requested amount, but in a naïve way; so, just having the sender’s inputs, a receiver output and change, and then the receiver gets that and adds their input and augments their own output to turn it into a payjoin. But that first Fallback PSBT is just a regular transaction that’s kind of held as a fallback in case things go wrong. Typically it’s not broadcast, but if for some reason the sender goes offline because they’re trying to probe, or they just disappear, it’s an automated system that will get broadcast; but if you know it’s your friend next to you trying to make a payment, you don’t have to broadcast in that situation.

Brandon Black: Why use a PSBT for that fallback transaction versus just a fully signed network transaction?

Dan Gould: So it is fully signed. The reason it’s a PSBT is because you want to modify it and you want to have some UTXO information in order to – what do you need the UTXO information for? You need the UTXO information in order to calculate the fees and know the size. So, the receiver benefits from having that information. And if you just have your raw transaction, then you need to also have the complete UTXO set so you can look up the UTXOs and create these. So, if they’re just in the PSBT, it’s a lot easier to deal with. And I propose we update to PSBT v2 because the first version of PSBTs isn’t meant to have the input and output maps updated once the transaction is built. You either create a new PSBT with new inputs and outputs, or you don’t change things at all. And of course, in the payjoin protocol, we move these things around, so it’s a lot easier to use the new format.

Mark Erhardt: So, the PSBT would serve both as the schema for the recipient to add their own input and increase the recipient amount, and also as the fallback mechanism with which it can just make sure that it does get paid. That was, by the way, the part that I was missing. Thanks for elaborating that.

Mike Schmidt: Dan, you mentioned feedback was good to the mailing list post in the draft BIP so far. Maybe you can comment on what we highlighted in the newsletter here, Adam Gibson warning about the encryption key within the BIP21 URI; you want to just comment on that quickly?

Dan Gould: Sure thing. Yeah, the first version of this and the first version of the BIP that I posted didn’t use public key cryptography, they used a secret that was also shared in the BIP21. And Adam said, “This might not be safe”, and I figured out that it’s really not safe to use a secret in the BIP21 URI for two reasons. One is that users don’t keep those secret. People will post a Bitcoin address in unencrypted chat. They don’t expect that they’ll lose funds when that happens. It’s best for privacy to keep those things secure, but they don’t expect to lose funds. But if the secret is in the URI, not only could a relay figure out that secret if it was leaked, say, in a group chat, and find the contents of the message to break privacy, but could actually also steal funds during the protocol if they knew the key, because that payjoined PSBT can update the outputs, including the address; and if the update were to an address that’s not the receiver, then funds would be stolen.

So, this is relatively easy to fix with public key cryptography. And we’ve kind of been able to move on to some metadata leaks. Adam brought up the fact that the size of the message and the timing and payjoins that come onchain within a certain window create an intersection of things that can be used to de-anonymize the payjoin transactions, so we need to be very careful with how we handle those. Some other interesting feedback was about encoding pubkeys in URIs, which I didn’t know about before, but there’s a Blockchain Commons scheme, called UR, that reduces the size of QR codes if you encode that way. And there have been a few proposals using Nostr, which suffer from some of the metadata problems as the original proposal of this. So, it’s evolving and if there’s more feedback, I’m definitely interested in hearing it.

Mike Schmidt: Dan, we also covered a Payjoin Development Kit back in Newsletter #260 in our monthly segment on Client and service software highlights. You were not on for that one, so maybe you want to plug that effort before we hop off?

Dan Gould: Sure, yeah, and I think this gives the opportunity to kind of paint a broad stroke about what I’m trying to do to address Bitcoin privacy and what I feel would be the best thing for the community. So to start with, Payjoin Dev Kit, the privacy solutions in the Bitcoin space have largely relied upon specific applications before. So, you have to use this app to coinjoin, you have to use this one to coin swap, you have to use this one for statechains, and it creates a very fragmented Bitcoin userbase about both what the best practices are, and then the actual number of transactions that look like one another, that have the property that you can’t tell them apart.

So, because payjoin is steganographic, we call it, you can’t tell it apart from other typical transaction activity, I started focusing on that. And in order to get it in all these wallets that aren’t siloed into one application, I started to follow the Bitcoin Dev Kit, Lightning Dev Kit direction that we’ve seen the space have a lot of success with so far. So, writing the systems code in Rust, that way it can be tested for correctness and be high performance. It also allows us to bind it in a number of other languages, so we can build the library one time and run it from JavaScript and run it from C# and run it from Python.

Lastly, and I think most importantly, we can combine our efforts as engineers on one codebase that gets reviewed very well, then gets tested very well. And this relates back to the bigger project of deploying serverless payjoin. Because HRF put a bounty out early this month, I think there is naturally competition, people want to get that. And at the same time, it’s very important for Bitcoin that the protocol that comes out of this has some idea of consensus around its deployment, because it only really works if as many people as possible deploy it, if everyone supports it.

In the past, we’ve had payjoin, and some of the barriers to adoption have not only been technical, a lot of them have been political, unfortunately, driven, in my view, by some zero-sum competition. And the benefit we have by having this project funded by OpenSats and not having to chase a profit motive is we can do the research and take our time, to some extent. Time is of the essence, unfortunately Bitcoin does have enemies, but we can take our time to create a secure protocol that addresses all of the needs of the industry players and the wallets and delivers a good product to the users.

So, my focus right now is on getting that unity and that’s why I’m going through the BIP process for the first time, collecting this feedback and hoping and knowing we will come to rough consensus to deliver this; because if we don’t, then the bounties will dry up. I think if the resources don’t end up paying for a successful outcome, if they create some short-term, “Deliver this DM spec”, that nobody ends up using, then it’s just not going to happen again. So yeah, I think unity is really important. And if you’re interested in contributing to any of this kind of stuff, is where the blog started, some documentation is, there is a link to the Discord, and then of course the BIP will continue to be developed on the mailing list and in those forums. So yeah, I’m very hopeful, and thanks to Optech for giving me a platform to share today.

Mike Schmidt: Murch, any questions or comments before we move on? All right. Well, Dan, you’re welcome, thank you for joining us. You’re welcome to stay on. We’ve got a pretty cool field report about MuSig2 that we’re going to jump into now. Otherwise, if you have other things to do, you’re free to drop.

Field Report: Implementing MuSig2

Next section of the newsletter is a field report about MuSig2. So periodically, we have projects and companies that are implementing interesting Bitcoin tech, author guest post, that we call a field report for the Optech blog, outlining best practices and lessons learned to share with the broader community. A few weeks ago, we highlighted BitGo’s announcement of using MuSig2 on their platform, and we were lucky enough that BitGo engineer, Brandon Black, who was instrumental in BitGo’s MuSig2 rollout, happened to be on our Twitter Space and opined on it. So, I asked him after the podcast if he was up for writing a field report for Optech, and I think it was just a day or two later, he had a great draft that you guys see now ready to go.

So, Brandon, from some Twitter feedback I’ve seen, the community really loved your writeup, so thank you for that. Do you want to walk through some of the highlights of the report? And I’ll also maybe solicit any questions from the audience for Brandon, if there are any, as he walks through the writeup.

Brandon Black: Yeah, sure. Yeah, thanks a lot for inviting me to write this. I was able to turn it around fast because I’d just recently written the blogpost at BitGo for it as well, so I’d kind of the right the right context to write it up pretty quickly. I think really I’m going to in some ways jump to the end with my biggest highlight from it, which is as companies being involved in the Bitcoin process is so important, that I think it ties into what Dan was talking about, kind of getting unity and getting the right people involved to make protocols actually get into the real world. So BitGo, we were interested in MuSig from the very beginning of taproot, and so we got in touch directly with Jonas Nick, who was working on the spec, and talked with him about how we wanted to use it early on so that he could make sure that our use case was well covered and got even one specific aspect added to the spec that helped us implement. So, that’s really the biggest highlight that I thought was really important to talk about for all of us that work in the corporate Bitcoin space.

Getting into it a bit more, the other things we cover in the field report here, it’s been really interesting looking at the trade-offs of using taproot outputs versus other previous types. Obviously, Murch has the great blogpost he wrote years ago about the trade-offs of input sizes with different ways of doing multisig on taproot, which plays into how you use MuSig2 as well in taproot. So, we went through a bunch of the trade-off analyses there in designing our implementation. And the other thing that was, I think, worth highlighting is the simplicity of MuSig2. As I mentioned in the writeup, it can be implemented in 461 lines of Python. I’ve implemented it twice now, once in JavaScript and once in C, and both implementations are very easy to reason about, very easy to understand. And it is very easy with an implementation of MuSig2 to reference it back to the great spec that Jonas and Tim and Elliott wrote, and verify that the implementation is correct. So, if you hire a firm to analyze the correctness of your implementation back to the spec, it’s very easy to do with MuSig because the spec is so well-written and so simple, you can be very confident in your deployment of MuSig2. So we were very, very happy about that.

I think really worth highlighting is nonces in general. I think this is going to be the greatest challenge of MuSig2 getting rolled out more broadly early on in – actually, I shouldn’t even say early on. One of the most common attacks on Bitcoin wallets is badly generated nonces. I just saw a tweet yesterday about some wallet that was using half the message and half the pubkey or something as the nonce. And for plain ECDSA or for plain BIP340 schnorr signatures, we have a very well-defined deterministic nonce mechanism which protects users from all those nonce pitfalls. And with MuSig2, unfortunately you can’t use those off-the-shelf deterministic nonce protocols. Jonas and team did a great job of specifying how to produce a good nonce for MuSig2, but it’s then left to the implementers to manage those nonces, to not store the secret nonces and let them be reused potentially.

So, you have to think about in what cases could an attacker halt the protocol while you have a secret nonce, and then restart it in a way that causes you to reuse the secret nonce. All those kinds of problems that we avoid with deterministic nonces in one-signer protocols now rear their heads in multi-signer protocols. So, just something to really pay attention to as we roll this out more into the community when we’re auditing wallet implementations, check on how they manage the secret nonces. Yeah, I think that’s the highlights.

Mike Schmidt: Murch, what do you think, BitGo rolling out MuSig2 and some of choice of scripts here in the nonce discussion?

Mark Erhardt: Yeah, I’m really happy that you guys came through on that and added taproot support the weekend after taproot activated. And then, well, I guess you did have to come up with another address type because the first one wasn’t compatible with the final MuSig spec, but that’s really continuing the tradition. We rolled out segwit two weeks after segwit activated. Well, wrapped segwit, to be honest. But yeah, anyway, I’m pretty happy that you all managed to do that.

Brandon Black: Yeah, we had to follow your footsteps, man. Yeah, and the good thing about the fact that we couldn’t use the original address type, or we couldn’t reuse it for MuSig2, is that we did make a more compact script tree in the second address type. So now, we have one address type that’s focused on your very cold offline where everything is a script, and then a separate address type that’s focused on your very fee-sensitive hot wallets that pay a lot of transaction fees. So, I think it’s a good disjunction, actually.

Mike Schmidt: It’s a great example, this field report, and what you guys did to contribute to the spec. I didn’t have any idea until we spoke how involved the BitGo team was with reviewing and contributing to this work. We sort of know that the folks like Jonas Nick, and some of the Blockstreamers were doing some research on this, but it’s nice to see, especially as part of Optech’s mission is to sort of bridge the gap between what’s being worked on, sort of in the open-source realm, with what’s going on in industry, and this is like a perfect example of that. So, applause to you guys for your involvement. Murch or Dan, any other questions or comments on the field report?

Mark Erhardt: Maybe one more comment. I think people that have an enterprise in the Bitcoin space and are looking at whether to implement ECDSA MPC in order to have single-sig and save costs, while under the hood they may have multiple signers, just as they could have with on-script multisig and then have the additional cost of having a bigger script and a reduced privacy for obviously standing out among mostly single-sig transactions, I think that using P2TR is by far the best approach to achieving both of those goals; a smaller output type that has a lower onchain cost, as well as blending in with the single-sig. So, I hope that this example is followed by other wallets that use multisig for the security benefits but don’t want to have it at the cost of having larger output types.

Brandon Black: I think even to put that farther, by Bitcoin adding taproot, it enabled this with this simple protocol versus other coins out there that don’t have onchain multisig and don’t have taproot, force companies to do harder things to achieve that fee savings, whether that’s using these complex MPC protocols or other ways of avoiding those fees. So Bitcoin, people tease about Bitcoin Core developers not doing what the industry needs, or whatever, but taproot’s a great example. It may not have been accessible immediately on taproot’s launch, but it’s exactly what the industry needs to be able to provide the security without a cost increase.

Mark Erhardt: Oh yeah, one more comment. So, one of the reasons why we pushed so hard back in 2017 to roll out segwit support at BitGo was that, that year was one of the first that saw a lot of higher feerates. We’ve had periods of higher feerates before, but in 2017 they became a lot more frequent and a lot more explosive, in that people were almost always still trying to be in the next block, so they would overbid each other drastically. And in the winter of 2017, we saw feerates over 1,200 sats/vbyte. So, if you at that point can reduce the input size of your standard transactions, especially on a high-volume wallet like an exchange, that probably receives in the hundreds of UTXOs per day in deposits and probably makes hundreds of transactions and withdrawals, then taking it from 2-of-3 multisig, even with P2WSH that has 104.5 vbytes per input, to 57.5 vbytes per input is like 43% cost reduction on your inputs. And you will feel that, especially when the feerates go up, as we saw in March again with the BRC-20 nonsense.

So, yeah, I think that for companies, especially high-volume users, this is awesome. And it also has an effect on the overall ecosystem because if the high volume users switch to these more block-space-efficient output types, it also reduces the block space demand that others have to compete with.

Brandon Black: We were wishing we could have launched this sooner during those high feerates early this year, but we just were not ready.

Mike Schmidt: I saw some commentary on Twitter, folks asking for more field reports. I do see a miniscript maximalist in the Twitter Space, and maybe we would need to tap on him to get a miniscript field report at some point. But it’s good to hear that the community got a lot of value of your writeup, Brandon, so thanks again for doing that.

Core Lightning 23.08rc2

All right, next section from the newsletter is Releases and release candidates. We have one this week, which is Core Lightning 23.08rc2, a release code named Satoshi’s Successor. We don’t like to spoil new releases too much in their release candidate stage, but I’ll call to action anyone using Core Lightning (CLN) as their backend to check out a bunch of new RPCs and RPC improvements: the renepay plug-in we spoke about last week with Eduardo; and also, the new REST API service that I think we spoke about with Lisa previously. So, if you’re interested in any of that and you’re using CLN as your backend, maybe you want to test some of that out for these folks for the release candidate. Murch, any comments on that release?

Mark Erhardt: I have not looked at it at all yet.

Mike Schmidt: Notable code and documentation changes. I’ll take this opportunity to solicit any questions from the audience. If you want to request speaker access or leave a question or comment on the thread in this Twitter Space, we’ll try to get to that by the end of the show.

Bitcoin Core #27213

First PR is Bitcoin Core #27213. This PR attempts to open a connection to at least one peer on each reachable network, including Clearnet or CJDNS, for example, and then will also prevent any sole peer on any network from being automatically evicted. And the result of that is that it could reduce the risk of eclipse attacks of a particular node, and also prevent accidental network partitions where a network of nodes, say on CJDNS, all get cut off from the other networks. Murch, I know you have some familiarity with this topic. What would you add to that?

Mark Erhardt: So, if you run a Bitcoin Core node on your machine and you already have Tor configured on your machine, it will automatically connect to the Tor network. I don’t know if many of you are familiar with that or didn’t know that fact. So, if you just run it on a regular box, of course, you’ll only make Clearnet connections, but any other networks that are already configured on your box, your node will automatically make connections to. And generally, of course, I guess there would be way more Clearnet nodes than any of the other networks. I think that we have a quite substantial number of Tor nodes, I think mostly because it’s one of the easiest ways to pierce through NATs.

If you have a network or your internet provider doesn’t make it easy to open up ports on the Clearnet and you cannot turn your node into a listening node where you serve light clients and get inbound connections in general, then enabling Tor is an easy way to get more peers on the Bitcoin Network. So, a lot of people, especially node-in-the-box setups, automatically have or come with Tor support in order to make use of that. But you wouldn’t want to drop all connections to one network.

Even when you have way more Clearnet nodes, they shouldn’t displace the last one to the other networks, and that’s what this PR does; it just ensures that you always at least have one connection to any of the networks and that way, it helps against eclipse attacks, which are actually easier on Tor than on Clearnet, because on Clearnet we can already look at the region of an IP address and make sure that we diversify that. And then it’s way harder for an attacker to try and push out all of our existing connections. Whereas on Tor, it all looks like a single region essentially, and someone spinning up thousands of Tor nodes to hammer our inbound requests would have a way easier time to try and take over our connection space in Tor.

So anyway, having diverse connections will make it easier for you to have at least one honest peer in order to stay on the best chain.

Mike Schmidt: Murch, is there any consideration about how that peer on that one network that you may be holding on to from automatic eviction, it doesn’t matter how good or how poorly it’s performing, it still will be retained as a peer regardless, I guess, as long as it’s not doing anything malicious, but if it’s just slow, for example; would it get evicted or it just will keep it for this contingency reason?

Mark Erhardt: The last one is generally protected. We will not evict it before we have another connection in the same network. I know that there are various ways how we cycle out peers. Generally, we will keep all peers that we’re connected to unless we get a new peer that supersedes one, so if we have reason to have less preference for a peer, for example if they were slow and haven’t sent us a block or a transaction as the first one in a long time, or I think there’s also some other patterns that we set a peer to be the designated disconnect on the next request. But yeah, so if we wanted to get rid of our last Tor node, for example, Tor peer, we would make first another connection on the Tor network before we drop it.

Bitcoin Core #28008

Mike Schmidt: Next PR that we covered in the newsletter is Bitcoin Core #28008, which adds encryption and decryption routines planned to be used for the implementation of v2 transport protocol, which is specified in BIP324. So, this is the essentially opportunistic encryption between nodes. If you click on the #28008 PR that we had in the newsletter here, you’ll see a reference to the parent or tracking issue for BIP324, which is #27634. I’m such a sucker for these tracking issues because it lets you see a high-level perspective of projects in which a bunch of PRs are independently in the repo kind of stitched together with these tracking issues. So, you’ll see a checklist of all the planned tasks to bring BIP324 to Bitcoin Core. It gives you a great overview of the progress made and the planned future work for the initiatives.

We noted in the newsletter writeup this week the different ciphers and classes that were added, although I can’t speak to the details of any of them. Murch, do you have comments on these ciphers or BIP324 in general?

Mark Erhardt: Well, so probably a lot of you have heard that we’ve been working on a v2 protocol, a new protocol for how nodes communicate with each other. The regular old v1 P2P protocol is unencrypted, so for example, your ISP will be able to immediately determine that you’re running a Bitcoin node, will even see what blocks and transactions you’re forwarding and receiving from other peers. With the v2 protocol in general, all traffic between Bitcoin nodes would be fully encrypted, and this would just make it harder for a passive attacker to listen in on the network traffic.

So obviously, a lot of the stuff that full nodes converse about is completely public knowledge, so that isn’t super-scary that it is visible to, for example, the ISP. But one of the benefits that we would achieve with this is that, for example, other traffic can hide by mimicking the P2P traffic of Bitcoin nodes and look like Bitcoin node traffic to the passive observer. So, for example, I don’t know, a data transfer protocol could mimic the traffic of a Bitcoin node and then not stick out, or a messaging protocol that provides encrypted messaging might look like Bitcoin traffic and hide within the network’s traffic. And then there’s other ideas on what we can build on top of that. Like, yeah, let’s get into that when it’s more public.

But anyway, the V2 protocol has been first proposed, I think, in 2015. So, this has come a long way since, and yeah, it’s starting to look pretty close to getting done.

Mike Schmidt: This is a great newsletter to see the progress of Bitcoin tech. We have innovations that have been in progress for a while, like silent payments in BIP324, getting PRs to Bitcoin Core; we have existing tech like payjoin getting improved with the work that Dan is doing, as well as efforts to bring that tech to market using the Payjoin Development Kit library; we have the MuSig2 rollout from BitGo, seeing some of the techs from years past getting rolled out to industry and to a wide variety of users; we have this Bitcoin Core #27213 from a security and eclipse attack perspective getting merged. It’s one of those newsletters where you can kind of feel the innovation moving forward and some of the older projects getting adoption and newer projects getting traction. So great to see this #28008 PR.

LDK #2308

We have one more PR this week, which is LDK #2308, which adds support for sending and receiving custom TLV records, TLV standing for Tag-Length-Value records within a payment. That allows users to send extra application-specific data along with a payment, assuming that you have a compatible receiver who can extract that custom metadata from the payment. Murch, any thoughts on this LDK PR?

Mark Erhardt: I just noticed a typo. I think TLV actually stands for Type-Length-Value! But anyway, yeah, it sounds like a good idea to be able to attach additional information to invoices that are transferred out of band anyway, mostly. Maybe after BOLT12, we’ll see some in onion messages as well, but just a few bytes here and there wouldn’t really be much of a burden, and it might sponsor some new or inspire some new use cases, so pretty cool. Also, I think this was probably the most privacy-heavy newsletter we’ve done in a long time, so maybe that’s why we’re having so much fun here.

Mike Schmidt: Well, thank you to Dan and Brandon for joining us and talking us through the great work you’ve been doing, thanks always to my co-host Murch, and thank you all for taking the time out of your day to hear about Bitcoin tech. We’ll see you all next week. Cheers.

Mark Erhardt: Cheers. Hear you soon.