Satoshi Scoop Weekly, 19 Jul 2024

Crypto Insights

Bitcoin Testnet 4: Including PoW Difficulty Adjustment and Time Warp Bug Fix

• In addition to consensus changes, the main differences between Testnet 4 and 3 are reflected in the chain parameters: the deployment heights of past soft forks were set to 1, meaning they were active from the start. Additionally, Testnet 4 uses a different port (48333) and messagestart, as well as a new genesis block message testnet4_genesis_msg;

• Time warp vulnerability, which enables attackers to significantly manipulate the block production rate, has been addressed in this update. Since this is part of the consensus cleanup soft fork, testing the fix in Testnet 4 first can provide useful early feedback. This PR fixes the time warp error by checking that the first block of a new difficulty epoch is not earlier than 2 hours before the last block of the previous epoch.

Optimizing Mempool Management and Enhancing Fee Estimation Accuracy through Cluster Linearization

• Cluster linearization aims at improving Bitcoin Core efficiency, especially in terms of mempool management;

• This concept introduces a new structure where transactions are organized into groups based on their connectivity, enabling more efficient transaction relay, block validation, construction, and eviction processes. This structure facilitates Replace-By-Fee (RBF) evaluations and enhances fee estimation accuracy.

New Logarithmic-Size Signature Scheme LS-LSAG Shows Promise in Blockchain Applications

• The LS-LSAG (Simple Logarithmic-size LSAG signature) is designed to directly replace the existing linear-size LSAG/CLSAG (Linkable Spontaneous Anonymous Group/Concise Linkable Spontaneous Anonymous Group) signatures, especially with significant improvement in size efficiency.

• A notable feature of LS-LSAG is its compatibility with full-chain Curve Trees, indicating that it can not only seamlessly replace LS-LSAG but also replace LSAG/CLSAG by merging additional curves with specific properties.

• For more details, read the research paper Simple Logarithmic-size LSAG signature.

ChillDKG: An Easy-to-Implement Distributed Key Generation Protocol for FROST Schnorr Threshold Signatures

• Jonas Nick and Tim Ruffing recently proposed BIP draft, ChillDKG draft, a distributed key generation (DKG) protocol for FROST Schnorr threshold signatures.

• While the PedPop DKG protocol is best suited for use with FROST, it has stringent requirements for communication channels between participants, making it difficult to deploy in practice. ChillDKG is a variant of PedPop, differing in that it includes the minimum but sufficient secure channels and consensus implementation (i.e., "batteries included"), thus having no external dependencies. This makes ChillDKG easy to implement and deploy.

Octojoin: Enhancing Transaction Privacy with Octopus Camouflage

• Octojoin addresses the challenge of PayJoin transactions (i.e., pay-to-end-point or P2EP). PayJoin enhances the privacy of the payer by hiding change, recipient amounts, and breaking the common input ownership heuristic, also provides an opportunity for the recipient to consolidate UTXOs. However, PayJoin requires interaction between the recipient and the payer, meaning UTXO sharing with untrusted users.

• Inspired by octopus' ability to camouflage, Octojoin allows users to include multiple inputs in a single transaction, some of which have a history associated with other users, making it difficult for chain analysis to separate individual outputs and determine their ownership, thereby enhancing privacy protection.

• For more information, visit: octojoin.github.io

Different Approaches to Introducing Dollar Balances to the Lightning Network

• The idea of "Stable Channels" was posted as an approach for Lightning Network (LN), aiming to introduce Bitcoin-backed dollar balances to LN, creating synthetic dollar balances on the stable side of the channel and leveraged long on the other, to address the issue of Bitcoin price volatility. Later, some considered this to be a "Fiat Channels" approach.

• Recently, the differences between these two approaches have been clarified: Fiat Channels introduce a custodial model, where the custodial channel client is not a regular Lightning node; whereas Stable Channels adhere to the idea of non-custodial, with clients being regular Lightning nodes, allowing users to mix BTC and USD channels on the same node.

RGB++ Layer: Upgrade Bringing DeFi to Bitcoin Layer 1

• The upcoming RGB++ Layer upgrade will introduce no-bridge cross-chain functionality and smart contract capacities to all UTXO chains.

• Additionally, the RGB++ browser and DeFi infrastructure based on the RGB++ Layer will also be launched soon. This brings various financial applications onto Bitcoin layer 1, including UTXOSwap, Stable++, ccBTC, LST CKB, etc.

• Also, RGB++ Layer will expand to other UTXO chains such as BCH, BSV, and Dogecoin, and support other layer 1 asset protocols such as Runes and BRC20.

Rune State Machine: A Turing-Complete, Programmable Runes Protocol on Bitcoin

• Runes State Machine (RSM) is a Turing-complete, programmable Runes Improvement Protocol. It aims to introduce DeFi to Runes and Bitcoin.

• Runes documentation: https://docs.rsm.network/

GitHub’s Community Guidelines for Open Source Creators

GitHub launched the open source guide opensource.guide, compiling best practices from the community for individuals and companies looking to learn how to operate and contribute to open source projects.

Europol Seeks to Break Mobile Roaming Encryption

• Europol's recent article, Position Paper: Home Routing and Risks to Lawful Interception, argues that home routing is not a useful security feature, but a "serious challenge for lawful interception."

• They propose two solutions: disabling privacy-enhancing technologies (PET) in home routing, and a cross-border mechanism within the EU where "interception requests are quickly processed by service providers."

Circle to Launch Euro-Backed Stablecoin EURC

• Circle, issuer of USDC, has recently introduced the euro stablecoin EURC, pegged 1:1 to euro. EURC is also one of the first stablecoins to comply with the new MiCA (Markets in Crypto Assets) regulation.

• MiCA is an agreement by the EU on the crypto asset market rules. MiCA has established the most comprehensive regulations for crypto asset markets in the world, and entered into force in June 2023.

Top Reads on Blockchain and Beyond

How NFT Royalties Work: Designs, Challenges, and New Idea

• NFT Royalties: The NFT market pushes for automatic royalty payments on secondary sales. Ideally, creators set the royalties onchain that would be paid automatically whenever their works are sold. However, distinguishing between royalty-eligible transfers (like sales) and non-eligible ones (like gifts or self-transfers) remains a challenge.

• New Approaches:

  1. Allowlists combined with staking: Enhances the existing allowlist model with staking, enabling marketplaces and other applications to permissionlessly acquire allowlist membership.

  2. Right of reclaim: Introduces incentives to ensure royalties are paid on each sale. If the asset owner wallet is different from the title owner wallet, then the title owner can always reclaim the NFT to their wallet at any time. The asset owner can remove this “reclaim risk” by paying a title transfer fee to the creator to become the title owner.

Research Paper: Simple Logarithmic-Size LSAG Signature

Abstract: A number of existing crypto systems use the well-known linear-size LSAG signature concept, extending it in many ways. This article presents a simple logarithmic-size signature LS-LSAG which, despite a radical reduction in size, retains the basic code block of LSAG. Therefore, substituting LS-LSAG for LSAG requires minimal changes to almost any existing LSAG/CLSAG-based solution, making it logarithmic instead of linear.