Re: [Bitcoin-development] BIP proposal: Authenticated prefix trees

[Mark Friedenbach <mark@monetize.io>]

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(Sorry Peter, this was meant for the whole list:)

On 12/20/2013 05:17 AM, Peter Todd wrote:
> I've thought about this for awhile and come to the conclusion that 
> UTXO commitments are a really bad idea. I myself wanted to see them
> implemented about a year ago for fidelity bonded banks, but I've
> changed my mind and I hope you do too.
> 
> They force miners and every full node with SPV clients to store the
> entire UTXO set in perpetuity.

This is incorrect. If the slower proof-updatable hashes are used, then
mining only requires what I've called "operational proofs" to be
attached to received transactions and blocks.

Access to the UTXO set is required to make new transactions, at least
for the outputs of the transaction, but I do not believe this is as
significant a problem as you do. It is a service that can be
outsourced for a minimal fee - include an explicit output of the
necessary amount to a scriptPubKey specified by the archival node, and
they will make sure the proper proofs are attached.

> This is bad by itself, but then they make it even worse by making 
> Bitcoin really useful and convenient to use as a decentralized 
> database; UTXO commitments make it easy and convenient to
> implement systems like Namecoin on top of Bitcoin, yet we don't
> have the UTXO expiration that might make such uses reasonable.
> Right now the UTXO set is reasonable small - ~300MB - but that can
> and will change if we make it an attractive way to store data.
> UTXO commitments do exactly that.

You might have to explain this to me, but it is not clear to me how
the validation index could be twisted into providing a Namecoin-like
system. Or the address index either, which I presume is what you are
referring to. Namecoin works by assigning domains to outputs, and then
tracking ownership and configuration of that domain through chains of
outputs. But the UTXO set doesn't contain connecting information. At
best all it would be is a glorified, and expensive time-stamper,
unattractive because there are already better solutions.

> You're also *not* giving users what they actually want: the 
> transactions associated with their wallets. Even though Electrum 
> could easily work via a pure UTXO database they implemented 
> transaction lookup instead; Electrum servers cough up every 
> transaction associated with a user's wallet. If you're going to do 
> that, it's just as easy to do per-block lookup trees which don't 
> force the UTXO set to be stored.

At the cost of having the supposedly lightweight client query for each
of its coins on every single block, to construct a negative
proof-of-spend.

> There's also a more subtle issue: the security model of UTXO 
> commitments sucks. It encourages wallets to essentially trust 
> single confirmations because it's unlikely that nodes will want to 
> store the multiple copies of the UTXO set required to provide
> proof of multiple confirmations. Basically the issue is when you
> start your wallet you get a proof of UTXO set for the most recent
> block; that's just one confirmation. To get more confirmations you
> have to wait for subsequent blocks, checking the set on each block.
> Per block indexes on the other hand naturally lead wallets to
> count confirmations properly.

I don't think this is true, or at least you are not considering
available optimizations. You certainly don't need to store multiple
copies of the UTXO set.

I'm a little confused as to the exact situation you are describing.
When a key is loaded into a wallet, or a wallet comes online after a
significant absence, it looks for coins in the current UTXO set. If
any coins are found, their attached transaction record has a block
height field, so the confirmation count can be derived from that. As
blocks go by that count is naturally increased. I'm not sure how this
is different from the current situation.

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