[bitcoin-dev] Implementing Confidential Transactions in extension blocks

[ZmnSCPxj]

Good morning Kenshiro,

> - Soft fork: old nodes see CT transactions as "sendtoany" transactions

There is a position that fullnodes must be able to get a view of the UTXO set, and extension blocks (which are invisible to pre-extension-block fullnodes) means that fullnodes no longer have an accurate view of the UTXO set.
SegWit still provides pre-SegWit fullnodes with a view of the UTXO set, although pre-SegWit fullnodes could be convinced that a particular UTXO is anyone-can-spend even though they are no longer anyone-can-spend.

Under this point-of-view, then, extension block is "not" soft fork.
It is "evil" soft fork since older nodes are forced to upgrade as their intended functionality becomes impossible.
In this point-of-view, it is no better than a hard fork, which at least is very noisy about how older fullnode versions will simply stop working.

> - Safe: if there is a software bug in CT it's impossible to create new coins because the coins move from normal block to normal block as public transactions

I think more relevant here is the issue of a future quantum computing breach of the algorithms used to implement confidentiality.

I believe this is also achievable with a non-extension-block approach by implementing a globally-verified publicly-visible counter of the total amount in all confidential transaction outputs.
Then it becomes impossible to move from confidential to public transactions with a value more than this counter, thus preventing inflation even if a future QC breach allows confidential transaction value commitments to be opened to any value.

(do note that a non-extension-block approach is a definite hardfork)

> - Capacity increase: the CT signature is stored in the extension block, so CT transactions increase the maximum number of transactions per block

This is not an unalloyed positive: block size increase, even via extension block, translates to greater network capacity usage globally on all fullnodes.

Regards,
ZmnSCPxj