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351 sats \ 9 replies \ @TheMorningStar 25 Aug \ on: Sunday Survey: Do you want covenants? bitcoin
What are covenants?
It would've been much better with a little description.
Whenever you send Bitcoin, the destination “address” is actually a set of conditions that have to be satisfied to send those coins. For example, “you have to sign a transaction with the private key that corresponds to this pubkey”, or “you need to sign with 3/5 of these keys”, or “you have to sign with this key, unless its been a month, then you can sign with that key”.
In Bitcoin today, as soon as someone can satisfy those requirements, they can do anything with the coins.
This can present a challenge if you want to (for example) have two people share a UTXO. What you want to be able to do is say “if Alice signs with her keys, she can take her share of the UTXO, but not Bob’s share”. Now imagine that scheme not with 2 people but with 100 or 1000 people.
Another way you might want to restrict how the coins might be spent is a vault: “if I sign with these keys, my coins can start a withdrawal process, but if i cancel that process before two weeks are up, i get my money back”.
The first case is helpful for packing more economic activity into less blockspace. The second is for making bitcoin safer to hold.
These are examples of covenants: you put restrictions not just on who can spend the coins, but on how they are then spent.
Today we emulate covenants with presigned transactions (for example, in the lightning network), but that presents real challenges around interactivity, number of participants, protocol complexity.
Covenant proposals generally add functionality to Bitcoin to let us do these kinds of things and have it be enforced by Bitcoin consensus instead of complex presigning schemes.
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River describes them in their glossary.
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Thank you so much!
Glad to see River has many topics to learn.
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A useful model for thinking about this stuff is Black Markets. That is, restrictive rule sets, especially ones that restrict normal human desires, usually increase and incentivize worse behavior than they set out to prevent. I think this is what's playing out in bitcoin right now. By excessively restricting bitcoin script, it limits bitcoin's utility for earnest bitcoin-as-money usage, renders earnest usage uncompetitive with exploitative use, and makes perversion of bitcoin more profitable.
So, with a gun to my head today, I'd prefer we activate GSR and just make bitcoin script more expressive.
Inscriptions were possible before Taproot. Given my thinking above, it's not important what exactly made inscriptions technically possible. I'm more concerned with what makes inscriptions profitable and it's largely that there's not enough demand for blockspace that outstrips storing terrible art.
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It’s simplistic but I see two general directions to preventing “bad” bitcoin usage:
- Rules that can’t be misused (laws that can’t be broken)
- Rules that allow people do what they want so long as they don’t harm other people (natural law)
- imo results in a natural ratio of good people relative to bad people, good participants greatly outnumber the bad, and bad people have fewer incentives to be bad
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