Templates, Eltoo, and Covenants, Oh My!

02 Jul 2021

If you’ve been following The Discourse, you probably know that Taproot is merged, locked in, and will activate later this November. What you might not know is what’s coming next… and you wouldn’t be alone in that. There are a number of fantastic proposals floating around to further improve Bitcoin, but there’s no clear picture on what is ready to be added next and on what timeline. No one – core developer, technically enlightened individuals, power users, or plebs – can claim to know otherwise.

In this post I’m going to describe 4 loosely related possible upgrades to Bitcoin – SH_APO (BIP-118), OP_CAT, OP_CSFS, and OP_CTV (BIP-119). These four upgrades all relate to how the next generation of stateful smart contracts can be built on top of bitcoin. As such, there’s natural overlap – and competition – for mindshare for review and deployment. This post is my attempt to stitch together a path we might take to roll them out and why that ordering makes sense. This post is for developers and engineers building in the Bitcoin space, but is intended to be followable by anyone technical or not who has a keen interest in Bitcoin.

Bitcoin Eschews Roadmaps and Agendas.

I provide this maxim to make clear that this document is by no means an official roadmap, narrative, or prioritization. However, it is my own assessment of what the current most pragmatic approach to upgrading Bitcoin is, based on my understanding of the state of outstanding proposals and their interactions.

My priorities in producing this are to open a discussion on potential new features, risk minimization, and pragmatic design for Bitcoin.

Upgrade Summaries

Below follows summaries of what each upgrade would enable and how it works. You might be tempted to skip it if you’re already familiar with the upgrades, but I recommend reading in any case as there are a few non obvious insights.

APO: SIGHASH_ANYPREVOUT, SIGHASH_ANYPREVOUTANYSCRIPT

Currently proposed as BIP-118.

APO provides two new signature digest algorithms that do not commit to the coin being spent, or the current script additionally. Essentially allowing scripts to use outputs that didn’t exist at the time the script was made. This would be a new promise enforced by Bitcoin (ex. “You can close this Lightning channel and receive these coins if you give me the right proof. If a newer proof comes in later I’ll trust that one instead.”).

APO’s primary purpose is to enable off chain protocols like Eltoo, an improved non-punitive payment channel protocol.

APO can also emulate some of the main features of CTV and could be made to work with Sapio, partially. See the complimentary upgrades section for more detail.

CAT (+ variants)

Currently no BIP. However, CAT exists in Elements and Bitcoin Cash as a 520 byte limited form, so a proposal for Bitcoin can crib heavily from either.

Cat enables appending data onto other pieces of data. Diabolically simple functionality that has many advanced use cases by itself and in concert with other opcodes. There are many “straightforward” use cases of cat like requiring sighash types, requiring specific R values, etc, but there are too many devious use cases to list here. Andrew Poelstra has a decent blogpost series (part 1 and part ii) if you’re interested to read more. In particular, with much cleverness, it seems possible one could implement full covenants with just CAT, which covers (inefficiently) most of the other techniques discussed in this post.

CSFS: CHECKSIGFROMSTACK

Currently no BIP. However, CSFS exists in Elements and in Bitcoin Cash, so a proposal for Bitcoin can crib heavily from either.

CSFS enables checking of a signature against a message and key from the stack without including any transaction data.

Use cases include oracle protocols, key delegations, a channel update invalidation variant (Laolu claims this can be tweaked to be fully non punitive like eltoo, but you’ll need to bug him to write it up), and (+CAT) full covenants.

CTV: OP_CHECKTEMPLATEVERIFY

Currently proposed as BIP-119.

CTV enables committing to a specific “next” transaction from script. This is the ability to make an unbreakable promise on chain which Bitcoin can enforce (e.g. “This coin can only be spent to my multisig, or my backup after a timelock”). This is a departure from normal script which is traditionally only concerned with restrictions on the sender, CTV imposes restrictions on the recipient. More technically, CTV is essentially the ability to embed a signature of a specific transaction inside of a script without needing any elliptic curve operations. The validation costs are low. For more advanced logic, you can nest multiple different CTV Hashes either using taproot or up to the script length limits in regular script.

CTV can be used for vaults, channels, and many other uses. There’s also Sapio which is a language and toolkit for creating many kinds of programs with CTV.

CTV compliments CSFS to be able to emulate APO-like functionality sufficient to build Eltoo, potentially making APO feature-wise redundant.

Comparative Analysis

Now that we’ve got the basics covered, let’s explore these upgrades comparatively across several dimensions.

Design Specificity

“Design Specificity” is a subjective measure of how substantially an upgrade could change from its current design while still meeting the features goals. It is not to be confused with security or safety. Ranked in order from most to least design specific, with non-exhaustive lists of design questions based on ongoing community discourse as well as my own personal understanding of what might be desirable.

CSFS
CTV
CAT
APO

Explanations & Open Questions:

CSFS is very simple and there is essentially a single way to implement it. Three open questions are:
1. Should CSFS require some sort of tagged hash? Very likely answer is no – tags interfere with certain use cases)
2. Should CSFS split the signature’s R & S value stack items for some applications that otherwise may require OP_CAT? E.g. using a pinned R value allows you to extract a private key if ever double signed, using 2 R values allows pay-to-reveal-key contracts. Most likely answer is no, if that is desired then OP_CAT can be introduced
3. Should CSFS support a cheap way to reference the taproot internal or external key? Perhaps, can be handled with undefined upgradeable keytypes. One might want to use the internal key, if the signed data should be valid independent of the tapscript tree. One might want to use the external key, if the data should only be valid for a single tapscript key + tree.
CTV is a commitment to all data that can malleate TXID besides the inputs being spent, therefore CTV does not have much space for variation on design.
1. Should the digest be reordered or formatted differently? If there were more data on what types of covenants might be built in the future, a better order could be picked. Some thought has already gone into an order and commitments that make covenants easier, see the BIP for more. It’s also possible the serialization format for the variable length fields (scriptsigs, outputs) could be changed to make it easier to work with from script. (Maybe, minor change)
2. Should CTV include more template types? Possibly, CTV includes an upgrade mechanism baked in for new template types, so it is extensible for future purposes.
3. Should CTV commit to the amounts? CTV does not commit to the amount that a coin has. Input-inspecting functionality should be handled by separate opcodes, as CTV would be overly restrictive otherwise. E.g. dynamic fees through new inputs would be harder: given CTV’s design it is not possible to detect which field did not match therefore it is not possible to script against unexpected amount sent errors without some compromise (e.g. timeouts).
CAT is simplistic, and there are really few ways to implement it. However, because it requires some restrictions for security, there are difficult to answer open design questions:
1. What is the appropriate maximum stack size CAT should permit? Currently the design in Elements is 520 bytes, the max general stack size permitted in script.
2. Should CAT be introduced or SHASTREAM, SUBSTRING, or another variant? There is a strong argument for SHASTREAM because when constructing covenants (e.g. for use with CTV) based on TX data it’s possible for size of a data field (e.g., serialization of all outputs) to exceed 520 bytes.
There are many tough questions that the community has grappled with during APO’s design and engineering process, generally asking how APO-like techniques can be made ‘Generally Safe’ given iit breaks current assumptions around address reuse.
1. Should APO require chaperone signatures (in order to ensure that replay is not done by 3rd parties)? Current Answer: No, anyone is free to burn their keys by revealing them to similar effect.
2. Should APO use key tagging to mark keys that can use APO: Current Answer: yes, APO should be “double opt-in” (both requiring a tag and a signer to produce such a signature)
3. Should APO allow signing with the external taproot key: Current Answer: no, because it makes APO not “double opt-in”.
4. Should APO optimize signing with the internal taproot key? Answer: default key 0x01 refers to taproot internal key, so it can be made cheaper if you’re going to need it without having to repeat the entire key.
5. Should APO commit to the signing script? Answer: let’s do two variants.
6. Should APO instead be a larger refactoring of sighash logic that encapsulates APO (e.g. sighash bitmasks)? Current Answer: No, APO is good enough to ship as is and doesn’t preclude future work.

Safety

This category covers how “safe” each change is ranked from safest to least safe. What makes a change more or less safe is how limited and foreseeable the uses are of a specific opcode, in other words, how well we understand what it can do or where it might interact poorly with deployed infrastructure.

CTV
CSFS
APO
CAT

CTV is the safest new feature since fundamentally what it introduces is very similar to what can be done with pre-signed transactions, so it is only a pivot on trust and interactivity. Where there is some risk from CTV is that addresses (or rather, invoices) that are reused might have the same program behind them which could cause unintended behavior. This differs from the reuse problem in APO because the problem is stateless, that is, if you verify what is behind an address you will know what exists and does not exist. E.g., two payment channel addresses will create distinct payment channels that updates cannot be replayed across. In contrast with APO, paying one APO using address twice creates two instances of the same channel, state updates from one channel can be used on the other.

CSFS is the next safest, it is just a small piece of authenticated data. CSFS and CTV are relatively close in terms of safety, but CSFS is slightly less safe given a remote possibility of surprising uses of it to perform unforeseen elliptic curve operations. This functionality already exists for up to 5-byte messages. A hash preimage revelation can emulate a signer compactly. Using binary expansions and addition could be used to allow signing of values more compactly (e.g., 2x16x32 byte hashes could be used to construct a signature of a post-hoc selected Sequence lock). Read more here. Therefore it is appropriate to think of CSFS as an expansion of the efficiency of this technique, reusability of keys, and the types of data that can be signed over. Although CSFS is famously used to build covenants by comparing a CSFS signature to a CHECKSIG signature and getting transaction data onto the stack, CSFS cannot do that without CAT.

APO. This is the next safest because APO has some questions around key reuse safety and statefulness of information. See the above description in CTV for why this is tangibly worse for APO than CTV. See more discussion of APO’s safety & design trade offs here.

CAT is the least ‘safe’ in terms of extant Bitcoin concepts as it is highly likely CAT introduces at least advanced covenants if added, especially in conjunction with the above opcodes, but may also enable other unintended functionality. CAT is a source of continual surprise with regards to what it enables in composition with existing opcodes, therefore a systematic review of composability and known uses should be done before considering it. That CAT was forked out by Satoshi is of limited relevance as the variant proposed for reintroduction would not have the vulnerability present initially.

Complimentary Upgrades

Pairings of upgrades can work together to deliver functionality that neither could alone:

CAT + CSFS: full blown arbitrary covenants
1. With arbitrary covenants you can deploy many different kinds of smart contracts which are out of scope for this article.
CAT + CTV: Expanded covenants
1. slightly simpler to use interface but fewer features than CSFS + CAT which can covenant over witness data and inputs.
CTV + CSFS: Eltoo
1. This can add very similar functionality to eltoo with the script fragment: CTV <musig(pka, pkb)> CSFS <S+1> CLTV The protocol is essentially identical to the Eltoo paper, however there are a couple subtle differences required for dynamic fee rates.
CTV + APO: Slightly Different
1. Several sources have claimed that APO offers a strict superset of CTV’s functionality (but not efficiency). This is false. Their digests are slightly different, as such there are some niche smart contracts that could use the differences in commitment structure for interesting effects (CTV commits to all scriptsigs and sequences, APO cannot cover that data but can cover a few variants of less data covered).

By all means not an exhaustive list – feel free to message me with additions.

Recommendation

My recommendation is to deliver the upgrades described in this document in the following order:

CTV
CSFS
APO
CAT/SHASTREAM/SUBSTRING/etc

This recommendation comes as a synthesis of the thoughts above on the composability, safety, and open design considerations of the various proposals currently in flight.

With CTV in place, we can begin experimenting with a wide variety of contracts using the Sapio toolchain, as well as improve and invest in maturing the toolchain. Mature toolchains will make it easier to safely engineer and deploy applications making use of CTV and future upgrades.

CSFS is an independent change that can be deployed/developed in parallel to or before CTV, the implementation from Elements could be easily ported to Bitcoin. With CSFS and CTV, Eltoo-like constructions will be possible as well.

APO can then be deployed as an optimization to existing use patterns driven by market adoption of CTV+CSFS based use. This also gives us time to kick the can down the road on the design questions that APO prompts around generalization of signature digests and key reuse safety. A similar approach was discussed on the mailing list, but without the insight that CSFS + CTV was sufficient for Eltoo like constructions, requiring CAT instead.

Lastly, OP_CAT can be delivered as part of an effort towards generalized arbitrary covenants and perhaps in conjunction with some special purpose opcodes (such as OP_CHECKINPUT) that can more easily handle common cases. CAT, although it has safe implementations used in Elements, deserves very strict scrutiny given it’s documented surprising uses.

This approach represents a gradual relaxation of Bitcoin’s restrictions around smart contract programming that introduces useful, safe primitives and gives the community time to build and deploy useful infrastructure. The path described in this post is an opportunity to upgrade bitcoin with simple primitives that compose nicely for permissionless innovation.

Thanks to those who reviewed drafts of this post and provided valuable feedback improving the clarity and accuracy of this post, including pyskell, Keagan McClelland, Ryan Gentry, and Olaoluwa Osuntokun. Edit + Feedback ≠ Endorsement.

Jeremy Rubin