I am building a solution for distributed, delegated pre-signed transactions
(DDPST). This post introduces what DDPST are and why I think they are relevant
for multiple applications. If you are working on application that can benefit
from such a construction and want me to use your application in the proof of
concept code, please reach out. All feedback is welcome on the concept in
general.
Pre-signed transactions (PSTs) are utilized in numerous off-chain protocols
including Lightning Network, non-custodial trading, Statechains, and custody
protocols. PSTs are useful because they enable restricted access to funds and
their custody can be *delegated* with limited risk. Compare this with the
arbitrary control over funds that comes with access to the private keys. It is
conceivable then that a broad class of applications would benefit from a
mechanism to securely delegate PSTs. A mechanism to *distribute* custody of
PSTs across multiple entities can act as a practical countermeasure for
numerous attacks (e.g. denial-of-service, bribery, blackmail, etc.). Moreover,
systems of accountability among the custodians, with proofs of correct and
incorrect behaviour, form a foundation for engineering incentive structures
that align with the objectives of the application at hand. Finally, distributed
custody of PSTs could enable new trust models for the privacy of delegated PSTs
using multi-party computation.
# Examples
Consider first the example of vault-custody protocols [1], where there is a
requirement for a distributed network monitoring and response system to detect
breeches and trigger a recovery process. It is critical to protect against
denial-of-service (DoS) attacks that seek to compromise a monitoring node in
order to force the custody operation into a recovery process. In this attack
the adversary broadcasts the recovery transaction and reduces the accessibility
of the wallet owner's funds. A method for distributing custody of the recovery
transaction offers defence-in-depth, and a method for delegating custody
enables outsourcing the monitor and response service (see Watchtower
implementations currently under development [2,3]). A further improvement for
the protection of PSTs, that comes from distributing custody, is that
*proactive* security models can be instanciated such that successful attacks
must occur in a limited time-frame [4].
Consider next the example of justice transactions in the current Lightning
Network model. Here, it is critical that justice transactions are broadcast in
a timely manner in response to detecting that either party is attempting to
close the channel with a prior state. Attacks rely on disrupting the broadcast
of the justice transaction through, for example, bribing the watchtower to
wait. The watchtower can broadcast late and claim that it was an honest failure
due to network issues. The victim has no recourse to punish the watchtower nor
the malicious channel participant. If instead the justice transaction was
distributed among a set of independent watchtowers, and an accountability
system was in-place for their actions, a more robust incentive structure could
be engineered. Moreover, distributing custody of the justice transaction can
provide a new privacy mechanism for both operational security of a business but
also to mitigate targeted attacks such as bribery.
Best regards,
Jacob
# References
[1] Jacob Swambo, Spencer Hommel, Bob McElrath, and Bryan Bishop. Custody
Protocols Using Bitcoin Vaults. 2020. https://arxiv.org/abs/2005.11776
[2] The eye of satoshi - lightning watchtower.
https://github.com/talaia-labs/python-teos
[3] Private altruist watchtowers.
https://github.com/lightningnetwork/lnd/blob/master/docs/watchtower.md
[4] Ran Canetti, Rosario Gennaro, and Amir Herzberg. Proactive security:
Long-term protection against break-ins. CryptoBytes, 3:1–8, 1997.
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