[bitcoin-dev] Detailed protocol design for routed multi-transaction CoinSwap

[ZmnSCPxj]

Good morning Chris, and probably also Lightningers,

> However, it might be possible to prevent the maker from learning the collateral input at all.
>
> If my understanding of BIP-143 is correct, inputs are hashed separately (`hashPrevouts`) from outputs (`hashOutputs`).
> Bob can provide the `hashPrevouts` as an opaque hash, while providing a decommitment of `hashOutputs` to show that the outputs of the collateralized contract transaction are correct, which is all that Charlie really needs to know.
>
> Bob is incentivized to provide the correct `hashPrevouts`, because if it provides an incorrect `hashPrevouts` it cannot get a signature for a transaction it can use in case of a protocol abort, thus potentially losing its money in case of a protocol abort.
> Conversely, Charlie does not care where Bob gets the funds that goes into its contract output come from, it only cares that the Bob collateralized contract output is I+K.
> It loses nothing to sign that transaction, and it would prefer that transaction since its own contract output is only I.
>
> This solution is mildly "unclean" as it depends on the details of the sighash algorithm, though, and is not proposed seriously.
> Hopefully nobody will change the sighash algorithm anytime soon.........
>
> In addition, it complicates reusing Lightning watchtowers.
> Lightning watchtowers currently trigger on txid (i.e. it would have triggered on the txid of the B collateralized contract tx), but watching this needs to trigger on the spend of a txo, since it is not possible to prove that a specific `hashPrevouts` etc. goes with a specific txid without revealing the whole tx (which is precisely what we are trying to avoid), as both are hashes.
> Watchtowers may need to be entrusted with privkeys, or need to wait for `SIGHASH_ANYPREVOUT` so that the exact txid of the B collateralized contract tx does not need to be fixed at signing time, thus this solution is undesirable as well.

On the other hand, when considering Decker-Russell-Osuntokun, the `(halftxid, encrypted_blob)` approach to watchtowers simply does not work.
Watchtowers are simpler in Decker-Russell-Osuntoku if and only if the watchtower knows the funding outpoint, therefore knows which channel it is watching *before* an attack on the channel occurs, and is less private.

I have argued before that we should instead use `(sighash[0:15], encrypted_blob)` rather than `(txid[0:15], encrypted_blob)`.
This makes Decker-Russell-Osuntokun blobs indistinguishable from Poon-Dryja blobs, and the watchtower is not even made aware what the commitment type of the channel is until an actual attack occurs.

If watchtowers use `(sighash[0:15], encrypted_blob)` instead, the proposal to hide the collateral input behind `hashPrevouts` would be workable, as Charlie knows the entire sighash of the B collateralized contract transaction even if it does not know the txid.
This also does not reveal the funding outpoint, or whether it is watching a Poon-Dryja channel, a Decker-Russell-Osuntokun channel, or a CoinSwap.

--

Even if we propose that CoinSwap makers should run their own watchtowers rather than hire a public watchtower, it's safer for a CoinSwap maker to have watchtowers that are unaware of exactly *what* they are watching.
If the watchtowers are aware of the funding outputs they are watching, then every additional watchtower a maker creates increases the attack surface on the privacy of the maker, as the funding outputs becoming known allows the maker hodlings to be derived.

If watchtowers only get a partial sighash, then the information that they contain are not sufficient by themselves to determine what coins are owned by the maker, thus every additional watchtower is no longer a potential attack vector on the privacy of the maker.

So this is off-topic, but anyway, we should probably move to using `sighash[0:15]` instead of `txid[0:15]` for watchtowers.


Regards,
ZmnSCPxj