[bitcoin-dev] Proposal: Bitcoin Secure Multisig Setup

[Hugo Nguyen <hugo@nunchuk.io>]

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Hi all,
I would like to propose a new BIP for Secure Multisig Setup.
This proposal has taken inputs from folks at Coldcard, Shift Crypto and
Cobo -- listed below as co-authors.

This was inspired by my own experience working with hardware wallets on the
market, as well as existing research into the challenges of multisig.

Cheers,
Hugo

<pre>
  BIP: To be determined
  Layer: Applications
  Title: Bitcoin Secure Multisig Setup (BSMS)
  Author: Hugo Nguyen <hugo@nunchuk.io>, Peter Gray <peter@coinkite.com>,
Marko Bencun <marko@shiftcrypto.ch>, Aaron Chen <aarondongchen@gmail.com>,
Rodolfo Novak <rodolfo@coinkite.com>
  Comments-Summary: No comments yet.
  Comments-URI:
  Status: Proposed
  Type: Standards Track
  Created: 2020-11-10
  License: BSD-2-Clause
</pre>

==Introduction==

===Abstract===

This document proposes a mechanism to set up multisig wallets securely.

===Copyright===

This BIP is licensed under the 2-clause BSD license.

===Motivation===

The Bitcoin multisig experience has been greatly streamlined under [
https://github.com/bitcoin/bips/blob/master/bip-0174.mediawiki BIP-0174
(Partially Signed Bitcoin Transaction)]. However, what is still missing is
a standardized process for setting up multisig wallets securely across
different vendors.

There are a number of concerns when it comes to setting up a multisig
wallet:

# Whether the multisig configuration, such as Signer membership, script
type, derivation paths and number of signatures required, is correct and
not tampered with.
# Whether Signer persists the multisig configuration in their respective
storage, and under what format.
# Whether Signer's storage is tamper-proof.
# Whether Signer subsequently uses the multisig configuration to generate
and verify receive and change addresses.

An attacker who can modify the multisig configuration can steal or hold
funds to ransom by duping the user into sending funds to the wrong address.

This proposal seeks to address concerns #1 and #2: to mitigate the risk of
tampering during the initial setup phase, and to define an interoperable
multisig configuration format.

Concerns #3 and #4 should be handled by Signers and is out of scope of this
proposal.

==Specification==

===Prerequisites===
This proposal assumes the parties in the multisig support [
https://github.com/bitcoin/bips/blob/master/bip-0032.mediawiki BIP32], [
https://github.com/bitcoin/bitcoin/blob/master/doc/descriptors.md the
descriptor language] and encryption.

==Roles==
===Coordinator===

The Coordinator initiates the multisig setup. The Coordinator determines
what type of multisig is used and how many members and signatures are
needed. If encryption is enabled, the Coordinator generates a secret token,
to be shared among the parties for secure communication. The Coordinator
gathers information from the Signers to generate a descriptor record. The
Coordinator distributes the descriptor record back to the Signers.

===Signer===

The Signer is a participating member in the multisig. Its responsibilities
include providing its XPUB to the Coordinator, verifying that its XPUB is
included in the descriptor record and persisting the descriptor record in
its storage.

==Setup Process==

===Round 1===

====Coordinator====

* The Coordinator creates a multisig wallet creation session. The
Coordinator determines the type of multisig script used and the signing
configuration (<tt>M</tt> and <tt>N</tt>).
* If encryption is enabled, the Coordinator also generates a secret token,
hereby denoted <tt>TOKEN</tt>.
* TOKEN is in ASCII format and must have a minimum of 8 characters. TOKEN
should expire after some time period determined by the Coordinator, e.g.,
24 hours.
* TOKEN acts as an encryption key among the parties. The method of
encryption is AES, CTR mode. The encryption key can be calculated by
performing a double hash operation on the TOKEN: <tt>ENCRYPTION_KEY =
SHA256(SHA256(TOKEN))</tt>.
* A TOKEN value of <tt>-1</tt> means that encryption is disabled and all
the encryption/decryption steps below can be skipped.
* The Coordinator shares the TOKEN with all participating Signers over a
secure channel.

====Signer====

* The Signer generates a key record by prompting the user for the TOKEN and
a derivation path.
* The first line in the record must be the <tt>TOKEN</tt>. If encryption is
disabled, set the TOKEN to -1. The second line must be the <tt>KEY</tt>,
whereas KEY is an XPUB. KEY must include key origin information and written
in the descriptor-defined format, i.e.: <tt>[{master key
fingerprint}/{derivation path}]{XPUB}</tt>. The third line must be a
<tt>SIG</tt>, whereas SIG is the signature generated by using the
corresponding private key to sign the first two lines. Finally, the Signer
encrypts the entire record with ENCRYPTION_KEY.

===Round 2===

====Coordinator====

* The Coordinator gathers key records from all participating Signers. Abort
the setup if TOKEN has expired.
* For each key record, the Coordinator decrypts it using ENCRYPTION_KEY.
The Coordinator verifies that the included SIG is valid given the KEY.
* If all key records look good, the Coordinator generates a descriptor
record, which is simply the descriptor string plus a <tt>CHECKSUM</tt>, all
in one line. The CHECKSUM has BECH32 encoding and is described at [
https://github.com/bitcoin/bitcoin/blob/master/doc/descriptors.md#checksums].
The Coordinator encrypts this descriptor record with ENCRYPTION_KEY.
* The Coordinator sends the encrypted descriptor record to all
participating Signers.

====Signer====

* The Signer imports the descriptor record, decrypts it by prompting the
user for TOKEN.
* The Signer calculates and verifies the descriptor’s CHECKSUM. Abort the
setup if the CHECKSUM is incorrect.
* The Signer checks whether one of the KEYs in the descriptor belongs to
it, using path and fingerprint information included in the descriptor. The
check must perform an exact match on the KEYs, and not using shortcuts such
as matching fingerprints (which is trivial to spoof). Abort the setup if it
doesn’t detect its own KEY.
* For confirmation, the Signer must display to the user the descriptor's
CHECKSUM, plus other configurations, such as M and N. The total number of
Signers, N, is important to prevent a KEY insertion attack. All
participating Signers should be able to display the same confirmation.
* If all checks pass, the Signer persists the descriptor record in its
storage. The Signer should subsequently use the descriptor to generate and
verify receive and change addresses.

This completes the setup.

==QR Codes==
For signers that use QR codes to transmit data, key and descriptor records
can be converted to QR codes, following [
https://github.com/BlockchainCommons/Research/blob/master/papers/bcr-2020-005-ur.md
the BCR standard].

==Security==

This proposal introduce two layers of protection. The first one is a
temporary, secret token, used to encrypt the two rounds of communication
between the Signers and the Coordinator. The second one is through the
descriptor checksum and visual inspection of the descriptor itself.

The token is only needed during the setup phase, and can be safely thrown
away afterwards. The token does not guarantee that the Signer membership
set is not modified, since that depends on the overall security of all
parties in the setup, but it can make it significantly harder for an
attacker to do so.

There are three ways an attacker can modify the membership set: by changing
an existing member, by removing an existing member, or by adding a new
member.

For the first two methods, one of the Signers will be able to detect that
its membership has been changed or removed, and reject the final
descriptor. Thus, it is vital that all participating Signers check that
their membership is intact in the descriptor. Even one Signer failing to
check for its membership means that the setup could be compromised.

For the third type of attack, the descriptor checksum and visual inspection
of the descriptor itself are the only way to guard against malicious
members from being inserted into the set.

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