On Mon, Dec 07, 2015 at 10:02:17PM +0000, Gregory Maxwell via bitcoin-dev wrote:
> ... bringing Segregated Witness to Bitcoin.
> The particular proposal amounts to a 4MB blocksize increase at worst.

Bit ambiguous what "worst" means here; lots of people would say the
smallest increase is the worst option. :)

By my count, P2PKH transactions get 2x space saving with segwit [0],
while 2-of-2 multisig P2SH transactions (and hence most of the on-chain
lightning transactions) get a 3x space saving [1]. An on-chain HTLC (for
a cross-chain atomic swap eg) would also get 3x space saving [2]. The most
extreme lightning transactions (uncooperative close with bonus anonymity)
could get a 6x saving, but would probably run into SIGOP limits [3].

> If widely used this proposal gives a 2x capacity increase
> (more if multisig is widely used),

So I think it's fair to say that on its own it gives up to a 2x increase
for ordinary pay to public key transactions, and a 3x increase for 2/2
multisig and (on-chain) lightning transactions (which would mean lightning
could scale to ~20M users with 1MB block sizes based on the estimates
from Tadge Dryja's talk). More complicated smart contracts (even just 3
of 5 multisig) presumably benefit even more from this, which seems like
an interesting approach to (part of) jgarzik's "Fidelity problem".

Averaging those numbers as a 2.5x improvement, means that combining
segwit with other proposals would allow you to derate them by a factor
of 2.5, giving:

 BIP-100: maximum of 12.8MB
 BIP-101: 3.2MB in 2016, 6.4MB in 2018, 12.8MB in 2020, 25.6MB in 2022..
 2-4-8:   800kB in 2016, 1.6MB in 2018, 3.2MB in 2020
 BIP-103: 400kB in 2016, 470kB in 2018, 650kB in 2020, 1MB in 2023...

(ie, if BIP-103 had been the "perfect" approach, then post segwit,
it would make sense to put non-consensus soft-limits back in place
for quite a while)

> TL;DR:  I propose we work immediately towards the segwit 4MB block
> soft-fork which increases capacity and scalability, and recent speedups
> and incoming relay improvements make segwit a reasonable risk.

I guess segwit effectively introduces two additional dimensions for
working out how to optimally pack transactions into a block -- there's
the existing constraints on block bytes (<=1MB) and sigops (<=20k), but
there are problably additional constraints on witness bytes (<=3MB) and
there *could* be a different constraint for sigops in witnesses (<=3*20k?
<=4*20k?) compared to sigops in the block while remaining a soft-fork.

It could also be an opportunity to combine the constraints, ie
(segwit_bytes + 50*segwit_sigs < 6M) which would make it easier to avoid
attacks where people try sending transactions with lots of sigops in very
few bytes, filling up blocks by sigops, but only paying fees proportional
to their byte count.

Hmm, after a quick look, I'm not sure if the current segwit branch
actually accounts for sigops in segregated witnesses? If it does, afaics
it simply applies the existing 20k limit to the total, which seems
too low to me?

Having segwit with the current 1MB limit on the traditional block
contents plus an additional 3MB for witness data seems like it would
also give a somewhat gradual increase in transaction volume from the
current 1x rate to an eventual 2x or 3x rate as wallet software upgrades
to support segregated witness transactions. So if problems were found
when block+witness data hit 1.5MB, there'd still be time to roll out
fixes before it got to 1.8MB or 2MB or 3MB. ie this further reduces the
risk compared to a single step increase to 2x capacity.

BTW, it's never been quite clear to me what the risks are precisely.
Here are some:

 - sometime soon, blockchain supply can't meet demand

    + I've never worked out how you'd tell if this is the case;
      there's potentially infinite demand if everything free, so at
      one level it's trivially true, but that's not helpful.

    + Presumably if this were happening in a way that "matters", fees
      would rise precipitously. Perhaps median fees of $2 USD/kB would
      indicate this is happening? If so, it's not here yet and seems
      like it's still a ways off.

    + If it were happening, then, presumably, people become would be
      less optimistic about bitcoin and the price of BTC would drop/not
      rise, but that seems pretty hard to interpret.

 - it becomes harder to build on blocks found by other miners,
   encouraging mining centralisation (which then makes censorship easier,
   and fungibility harder) or forcing trust between miners (eg SPV mining
   empty blocks)

    + latency/bandwidth limitations means miners can't get block
      information quickly enough (mitigated by weak blocks and IBLT)

    + blocks can't be verified quickly enough (due to too many crypto
      ops per block, or because the UTXO set can't be kept in RAM)
      (mitigated by libsecp256k1 improvements, ..?)

    + constructing a new block to mine takes too long

 - it becomes harder to maintain a validating, but non-mining node,
   which in turn makes non-validating nodes harder to run safely (ie,
   Sybil attacks become easier)

    + increased CPU to verify bigger/more complicated blocks (can't keep
      up on a raspberry pi)

    + increased storage (60GB of blockchain might mean it won't fit on
      your laptop)

    + increased bandwidth

    + increased initial sync time (delayed reward = less likely to


[0] AIUI, segwit would make the "in block" transactions look like:

     * (4) version
     * (1) input count
     * for each input:
       - (32) tx hash
       - (4) txout index
       - (1) script length = 0
       - (4) sequence number
     * (1) output count
     * for each output:
       - (8) value
       - (1) script length = 34
       - (34) <33 byte push>
     * (4) locktime

    So about 10+41i+43o bytes (with the other information being external to
    the block and the 1MB limit, but committed to via the coinbase).

    A standard pay to public key hash would have a 25 byte output script
    instead of 34 bytes, but also a 105 bytes of input script, so about
    10+146i+34o bytes.

    Over enough transactions inputs and outputs are about equal, so that's
    10+84o versus 10+180o, so a factor of 2x-2.14x in the usual case.

[1] With a P2SH to a 2-of-2 multisig address, the output script would
    be 23 bytes, and the input script would be a 71B redeem script, plus
    two signatures and an OP_0 for about 215B, so totalling 10+256i+32o.

    Again treating i=o over the long term, that's 10+84o version 10+288o,
    so that's a 3.2x-3.4x improvement. 2-of-2 multisig payment would
    cover the normal case for on-chain lightning channel transactions,
    ie where both sides are able to cooperatively close the channel.

[2] A basic HTLC, ie: "pay to A if they know the preimage for X, or pay
    to B after a timeout of T", done by P2SH has about 98B of redeem script
    and either ~105B of signature or ~72B of signature for a total of 203B
    or 170B of input script. So that comes to 10+244i+32o or 10+211i+32o.
    Segwit gives an improvement of 3x-3.3x or 2.7x-2.9x there.

[3] A lightning-style HTLC, which adds a third option of ", or pay to
    B if A was trying to cheat" adds an extra 25 bytes or so to the
    redeem script, changing those numbers to 10+270i+32o and 10+236i+32o,
    and an improvement of 3.3x-3.6x or 2.9x-3.2x.

    A lightning-style HTLC that also uses ecc private keys as the secret
    preimages to be revealed [4] might use an additional ~260 bytes of
    redeem script / script signature, which would make the worst case
    numbers be 10+530i+32o, so 10+562o versus 10+84o, which would be a
    6x-6.7x improvement. But those particular scripts would be constrained
    by consensus sigop limits before the filled up much more than a quarter
    of a block in a segwit/1MB world anyway.


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