From mboxrd@z Thu Jan 1 00:00:00 1970 Return-Path: Received: from smtp1.linuxfoundation.org (smtp1.linux-foundation.org [172.17.192.35]) by mail.linuxfoundation.org (Postfix) with ESMTPS id 9B650722 for ; Mon, 8 Aug 2016 15:30:25 +0000 (UTC) X-Greylist: whitelisted by SQLgrey-1.7.6 Received: from mail-wm0-f46.google.com (mail-wm0-f46.google.com [74.125.82.46]) by smtp1.linuxfoundation.org (Postfix) with ESMTPS id 9E9871F3 for ; Mon, 8 Aug 2016 15:30:23 +0000 (UTC) Received: by mail-wm0-f46.google.com with SMTP id i5so147006045wmg.0 for ; Mon, 08 Aug 2016 08:30:23 -0700 (PDT) DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=gmail.com; s=20120113; h=mime-version:reply-to:from:date:message-id:subject:to; bh=EqBEUNl1mX3Ce39odHZhcrmADr8lZDzAP8Or/xFN+Hs=; b=b0kPPPGdxRKkGeZ0VAO2iOWWMeeef6yQySsEQyB2VG4Lcof8/cvkzecpmm/yIwYhFl YDPa2guuj8f+xIEmJKzcfnTUcuPWe+pyLFeUf2f/6x0DybTV1APb22YHpay+nqw4nddL SxxHi9R09n/nBxxybp9wmxMtZyVVSRHKVXYwArQ7jZMHTsEvLdWJRBJS0amXI03kAnnM ZyftNig9r1lQ2P3VEThSYb9QTBZc27CH82tnSShxKfnFXEBHXXNhu5ee5QseqtVFtFHJ of9IZKDUQbV2xGiWMQ6Mqi2bsXPSMEIKZrSLKI2qGNiyqDQxh/awLQMMGpxVs9ddwHu7 Ok6g== X-Google-DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=1e100.net; s=20130820; h=x-gm-message-state:mime-version:reply-to:from:date:message-id :subject:to; bh=EqBEUNl1mX3Ce39odHZhcrmADr8lZDzAP8Or/xFN+Hs=; b=CV5y+w8xNuhOwrm1wRUYX/8KAPfAVy4VokEemdTOvYZEQVVHueb4cupWv7TGjTjMEY kkl1zWE45/muZiYLg28m4EoJLGcDZEnlzi1dJqH+mASS56IH4qkmTBdls1cHArwyvEHI cZeiGs8nFsxX8yvOAq3hovCRA0qhx6QTgHHLXfwgJFSloF9YsxurYtIaR3iv2WIvs46m 4IfQggTWLFS95AzI3tPbeSfnxfW+8CnYNf0GfHGFOrBytrX7LqTCq2OXSGFSL/UVoqWm 6bA9mB5wt86O74uHkp+kof6Q4qwpOzeHCQSLQMemavVnXy8shPHBeJMkO9bE+n16dAdn I0SA== X-Gm-Message-State: AEkoouuQFPGdT4ayETD956gLvPXya5sR0H7jrQIo55Xl+8+3ccR+f6fwpeoxDhkN9Veex31WpmOhuODRBF7P3w== X-Received: by 10.28.223.139 with SMTP id w133mr17093705wmg.90.1470670221800; Mon, 08 Aug 2016 08:30:21 -0700 (PDT) MIME-Version: 1.0 Received: by 10.194.100.161 with HTTP; Mon, 8 Aug 2016 08:30:21 -0700 (PDT) Reply-To: tony.991@gmail.com From: Tony Churyumoff Date: Mon, 8 Aug 2016 18:30:21 +0300 Message-ID: To: bitcoin-dev@lists.linuxfoundation.org Content-Type: multipart/alternative; boundary=001a114b0aa826fbe00539911808 X-Spam-Status: No, score=-1.4 required=5.0 tests=BAYES_00,DKIM_SIGNED, DKIM_VALID,DKIM_VALID_AU,FREEMAIL_ENVFROM_END_DIGIT,FREEMAIL_FROM, FREEMAIL_REPLYTO, HTML_MESSAGE, RCVD_IN_DNSWL_LOW autolearn=no version=3.3.1 X-Spam-Checker-Version: SpamAssassin 3.3.1 (2010-03-16) on smtp1.linux-foundation.org X-Mailman-Approved-At: Mon, 08 Aug 2016 15:31:29 +0000 Subject: [bitcoin-dev] Hiding entire content of on-chain transactions X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.12 Precedence: list List-Id: Bitcoin Protocol Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Mon, 08 Aug 2016 15:30:25 -0000 --001a114b0aa826fbe00539911808 Content-Type: text/plain; charset=UTF-8 Content-Transfer-Encoding: quoted-printable This is a proposal about hiding the entire content of bitcoin transactions. It goes farther than CoinJoin and ring signatures, which only obfuscate the transaction graph, and Confidential Transactions, which only hide the amounts. The central idea of the proposed design is to hide the entire inputs and outputs, and publish only the hash of inputs and outputs in the blockchain. The hash can be published as OP_RETURN. The plaintext of inputs and outputs is sent directly to the payee via a private message, and never goes into the blockchain. The payee then calculates the hash and looks it up in the blockchain to verify that the hash was indeed published by the payer. Since the plaintext of the transaction is not published to the public blockchain, all validation work has to be done only by the user who receives the payment. To protect against double-spends, the payer also has to publish another hash, which is the hash of the output being spent. We=E2=80=99ll call this= hash *spend proof*. Since the spend proof depends solely on the output being spent, any attempt to spend the same output again will produce exactly the same spend proof, and the payee will be able to see that, and will reject the payment. If there are several outputs consumed by the same transaction, the payer has to publish several spend proofs. To prove that the outputs being spent are valid, the payer also has to send the plaintexts of the earlier transaction(s) that produced them, then the plaintexts of even earlier transactions that produced the outputs spent in those transactions, and so on, up until the issue (similar to coinbase) transactions that created the initial private coins. Each new owner of the coin will have to store its entire history, and when he spends the coin, he forwards the entire history to the next owner and extends it with his own transaction. If we apply the existing bitcoin design that allows multiple inputs and multiple outputs per transaction, the history of ownership transfers would grow exponentially. Indeed, if we take any regular bitcoin output and try to track its history back to coinbase, our history will branch every time we see a transaction that has more than one input (which is not uncommon). After such a transaction (remember, we are traveling back in time), we=E2= =80=99ll have to track two or more histories, for each respective input. Those histories will branch again, and the total number of history entries grows exponentially. For example, if every transaction had exactly two inputs, the size of history would grow as 2^N where N is the number of steps back in history. To avoid such rapid growth of ownership history (which is not only inconvenient to move, but also exposes too much private information about previous owners of all the contributing coins), we will require each private transaction to have exactly one input (i.e. to consume exactly one previous output). This means that when we track a coin=E2=80=99s history b= ack in time, it will no longer branch. It will grow linearly with the number of transfers of ownership. If a user wants to combine several inputs, he will have to send them as separate private transactions (technically, several OP_RETURNs, which can be included in a single regular bitcoin transaction). Thus, we are now forbidding any coin merges but still allowing coin splits. To avoid ultimate splitting into the dust, we will also require that all private coins be issued in one of a small number of denominations. Only integer number of =E2=80=9Cbanknotes=E2=80=9D can be t= ransferred, the input and output amounts must therefore be divisible by the denomination. For example, an input of amount 700, denomination 100, can be split into outputs 400 and 300, but not into 450 and 250. To send a payment, the payer has to pick the unspent outputs of the highest denomination first, then the second highest, and so on, like we already do when we pay in cash. With fixed denominations and one input per transaction, coin histories still grow, but only linearly, which should not be a concern in regard to scalability given that all relevant computing resources still grow exponentially. The histories need to be stored only by the current owner of the coin, not every bitcoin node. This is a fairer allocation of costs. Regarding privacy, coin histories do expose private transactions (or rather parts thereof, since a typical payment will likely consist of several transactions due to one-input-per-transaction rule) of past coin owners to the future ones, and that exposure grows linearly with time, but it is still much much better than having every transaction immediately on the public blockchain. Also, the value of this information for potential adversaries arguably decreases with time. There is one technical nuance that I omitted above to avoid distraction. Unlike regular bitcoin transactions, every output in a private payment must also include a blinding factor, which is just a random string. When the output is spent, the corresponding spend proof will therefore depend on this blinding factor (remember that spend proof is just a hash of the output). Without a blinding factor, it would be feasible to pre-image the spend proof and reveal the output being spent as the search space of all possible outputs is rather small. To issue the new private coin, one can burn regular BTC by sending it to one of several unspendable bitcoin addresses, one address per denomination. Burning BTC would entitle one to an equal amount of the new private coin, let=E2=80=99s call it *black bitcoin*, or *BBC*. Then BBC would be transferred from user to user by: 1. creating a private transaction, which consists of one input and several outputs; 2. storing the hash of the transaction and the spend proof of the consumed output into the blockchain in an OP_RETURN (the sender pays the corresponding fees in regular BTC) 3. sending the transaction, together with the history leading to its input, directly to the payee over a private communication channel. The first entry of the history must be a bitcoin transaction that burned BTC to issue an equal amount of BCC. To verify the payment, the payee: 1. makes sure that the amount of the input matches the sum of outputs, and all are divisible by the denomination 2. calculates the hash of the private transaction 3. looks up an OP_RETURN that includes this hash and is signed by the payee. If there is more than one, the one that comes in the earlier block prevails. 4. calculates the spend proof and makes sure that it is included in the same OP_RETURN 5. makes sure the same spend proof is not included anywhere in the same or earlier blocks (that is, the coin was not spent before). Only transactions by the same author are searched. 6. repeats the same steps for every entry in the history, except the first entry, which should be a valid burning transaction. To facilitate exchange of private transaction data, the bitcoin network protocol can be extended with a new message type. Unfortunately, it lacks encryption, hence private payments are really private only when bitcoin is used over tor. There are a few limitations that ought to be mentioned: 1. After user A sends a private payment to user B, user A will know what the spend proof is going to be when B decides to spend the coin. Therefore, A will know when the coin was spent by B, but nothing more. Neither the new owner of the coin, nor its future movements will be known to A. 2. Over time, larger outputs will likely be split into many smaller outputs, whose amounts are not much greater than their denominations. You=E2=80=99ll have to combine more inputs to send the same amount. When y= ou want to send a very large amount that is much greater than the highest available denomination, you=E2=80=99ll have to send a lot of private transactions, yo= ur bitcoin transaction with so many OP_RETURNs will stand out, and their number will roughly indicate the total amount. This kind of privacy leakage, however it applies to a small number of users, is easy to avoid by using multiple addresses and storing a relatively small amount on each address. 3. Exchanges and large merchants will likely accumulate large coin histories. Although fragmented, far from complete, and likely outdated, it is still something to bear in mind. No hard or soft fork is required, BBC is just a separate privacy preserving currency on top of bitcoin blockchain, and the same private keys and addresses are used for both BBC and the base currency BTC. Every BCC transaction must be enclosed into by a small BTC transaction that stores the OP_RETURNs and pays for the fees. Are there any flaws in this design? Originally posted to BCT https://bitcointalk.org/index.php?topic=3D1574508.= 0, but got no feedback so far, apparently everybody was consumed with bitfinex drama and now mimblewimble. Tony --001a114b0aa826fbe00539911808 Content-Type: text/html; charset=UTF-8 Content-Transfer-Encoding: quoted-printable
This is a proposal about hiding the entire content of bitc= oin transactions.=C2=A0 It goes farther than CoinJoin and ring signatures, = which only obfuscate the transaction graph, and Confidential Transactions, = which only hide the amounts.

The central idea of the pro= posed design is to hide the entire inputs and outputs, and publish only the hash of inputs and outputs in the=20 blockchain.=C2=A0 The hash can be published as OP_RETURN.=C2=A0 The plainte= xt of=20 inputs and outputs is sent directly to the payee via a private message,=20 and never goes into the blockchain.=C2=A0 The payee then calculates the has= h=20 and looks it up in the blockchain to verify that the hash was indeed=20 published by the payer.

Since the plaintext of the transaction is not published to the public blockchain, all validation work has to be=20 done only by the user who receives the payment.

To protect=20 against double-spends, the payer also has to publish another hash, which is the hash of the output being spent.=C2=A0 We=E2=80=99ll call this hash = spend proof. =C2=A0Since the spend proof depends solely on the output being spent, any= =20 attempt to spend the same output again will produce exactly the same=20 spend proof, and the payee will be able to see that, and will reject the=20 payment.=C2=A0 If there are several outputs consumed by the same transactio= n, the payer has to publish several spend proofs.

To prove that the outputs being spent are valid, the payer also has to send the=20 plaintexts of the earlier transaction(s) that produced them, then the=20 plaintexts of even earlier transactions that produced the outputs spent=20 in those transactions, and so on, up until the issue (similar to=20 coinbase) transactions that created the initial private coins.=C2=A0 Each n= ew owner of the coin will have to store its entire history, and when he=20 spends the coin, he forwards the entire history to the next owner and=20 extends it with his own transaction.

If we apply the existing=20 bitcoin design that allows multiple inputs and multiple outputs per=20 transaction, the history of ownership transfers would grow=20 exponentially.=C2=A0 Indeed, if we take any regular bitcoin output and try = to track its history back to coinbase, our history will branch every time=20 we see a transaction that has more than one input (which is not=20 uncommon).=C2=A0 After such a transaction (remember, we are traveling back = in time), we=E2=80=99ll have to track two or more histories, for each respect= ive=20 input.=C2=A0 Those histories will branch again, and the total number of=20 history entries grows exponentially.=C2=A0 For example, if every transactio= n=20 had exactly two inputs, the size of history would grow as 2^N=C2=A0where N = is the number of steps back in history.

To avoid such rapid growth of ownership history (which is not only=20 inconvenient to move, but also exposes too much private information=20 about previous owners of all the contributing coins), we will require=20 each private transaction to have exactly one input (i.e. to consume=20 exactly one previous output).=C2=A0 This means that when we track a coin=E2= =80=99s=20 history back in time, it will no longer branch.=C2=A0 It will grow linearly= =20 with the number of transfers of ownership.=C2=A0 If a user wants to combine= =20 several inputs, he will have to send them as separate private=20 transactions (technically, several OP_RETURNs, which can be included in a single regular bitcoin transaction).

Thus, we are now forbidding any coin merges but still allowing coin splits.=C2=A0 To avoid ultimate=20 splitting into the dust, we will also require that all private coins be=20 issued in one of a small number of denominations.=C2=A0 Only integer number= =20 of =E2=80=9Cbanknotes=E2=80=9D can be transferred, the input and output amo= unts must=20 therefore be divisible by the denomination.=C2=A0 For example, an input of= =20 amount 700, denomination 100, can be split into outputs 400 and 300, but not into 450 and 250.=C2=A0 To send a payment, the payer has to pick the= =20 unspent outputs of the highest denomination first, then the second=20 highest, and so on, like we already do when we pay in cash.

With=20 fixed denominations and one input per transaction, coin histories still=20 grow, but only linearly, which should not be a concern in regard to=20 scalability given that all relevant computing resources still grow=20 exponentially.=C2=A0 The histories need to be stored only by the current=20 owner of the coin, not every bitcoin node.=C2=A0 This is a fairer allocatio= n=20 of costs.=C2=A0 Regarding privacy, coin histories do expose private=20 transactions (or rather parts thereof, since a typical payment will=20 likely consist of several transactions due to one-input-per-transaction=20 rule) of past coin owners to the future ones, and that exposure grows=20 linearly with time, but it is still much much better than having every=20 transaction immediately on the public blockchain.=C2=A0 Also, the value of= =20 this information for potential adversaries arguably decreases with time.
There is one technical nuance that I omitted above to avoid distraction.=20 =C2=A0Unlike regular bitcoin transactions, every output in a private paymen= t=20 must also include a blinding factor, which is just a random string.=20 =C2=A0When the output is spent, the corresponding spend proof will therefor= e=20 depend on this blinding factor (remember that spend proof is just a hash of the output).=C2=A0 Without a blinding factor, it would be feasible to= =20 pre-image the spend proof and reveal the output being spent as the=20 search space of all possible outputs is rather small.

To issue=20 the new private coin, one can burn regular BTC by sending it to one of=20 several unspendable bitcoin addresses, one address per denomination.=20 =C2=A0Burning BTC would entitle one to an equal amount of the new private= =20 coin, let=E2=80=99s call it black bitcoin, or BBC. =C2=A0
=
Then BBC would be transferred from user to user by:
1. creating a pr= ivate transaction, which consists of one input and several outputs;
2. storing the hash of the transaction and the spend proof of the consumed output into the blockchain in an OP_RETURN (the sender pays the=20 corresponding fees in regular BTC)
3. sending the transaction,=20 together with the history leading to its input, directly to the payee=20 over a private communication channel.=C2=A0 The first entry of the history= =20 must be a bitcoin transaction that burned BTC to issue an equal amount=20 of BCC.

To verify the payment, the payee:
1. makes sure that the = amount of the input matches the sum of outputs, and all are divisible by th= e denomination
2. calculates the hash of the private transaction
3. looks up an OP_RETURN that includes this hash and is signed by the=20 payee.=C2=A0 If there is more than one, the one that comes in the earlier= =20 block prevails.
4. calculates the spend proof and makes sure that it is = included in the same OP_RETURN
5. makes sure the same spend proof is not included anywhere in the same or earlier blocks (that is, the coin was not spent before).=C2=A0 Only=20 transactions by the same author are searched.
6. repeats the same steps = for every entry in the history, except the first entry, which should be a v= alid burning transaction.

To facilitate exchange of private transaction data, the bitcoin network=20 protocol can be extended with a new message type.=C2=A0 Unfortunately, it= =20 lacks encryption, hence private payments are really private only when=20 bitcoin is used over tor.

There are a few limitations that ought to = be mentioned:
1. After user A sends a private payment to user B, user A will know what=20 the spend proof is going to be when B decides to spend the coin.=20 =C2=A0Therefore, A will know when the coin was spent by B, but nothing more= .=20 =C2=A0Neither the new owner of the coin, nor its future movements will be= =20 known to A.
2. Over time, larger outputs will likely be split into=20 many smaller outputs, whose amounts are not much greater than their=20 denominations.=C2=A0 You=E2=80=99ll have to combine more inputs to send the= same=20 amount.=C2=A0 When you want to send a very large amount that is much greate= r=20 than the highest available denomination, you=E2=80=99ll have to send a lot = of=20 private transactions, your bitcoin transaction with so many OP_RETURNs=20 will stand out, and their number will roughly indicate the total amount. =C2=A0This kind of privacy leakage, however it applies to a small number o= f=20 users, is easy to avoid by using multiple addresses and storing a=20 relatively small amount on each address.
3. Exchanges and large=20 merchants will likely accumulate large coin histories.=C2=A0 Although=20 fragmented, far from complete, and likely outdated, it is still=20 something to bear in mind.

No hard or soft for= k is required, BBC is just a separate privacy preserving currency on top of= bitcoin blockchain, and the same private keys and addresses are used for b= oth BBC and the base currency BTC.=C2=A0 Every BCC transaction must be encl= osed into by a small BTC transaction that stores the OP_RETURNs and pays fo= r the fees.

Are there any flaws in this design?

Originally posted to BCT=C2=A0https://bitcointalk.org/index.php= ?topic=3D1574508.0, but got no feedback so far, apparently everybody wa= s consumed with bitfinex drama and now mimblewimble.

Tony

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