Lecture 15: Bitcoin guest talk (Greg Maxwell & Pieter Wuille - Blockstream) on sidechains

Forking does not advance Bitcoin since forks suffer from economic acceptance.

UTXO model

UTXO model is less intuitive, more private, and smaller persistent storage footprint. UTXO implicitly prevents a replay attack. Ethereum carries nonce around even for empty accounts to prevent replay attacks.

Validation not computation

Bitcoin addresses are a 160-bit hash of the public key since the public key is unusually long (512-bit). Bitcoin payments can be made to scripts. These scripts are not for computation but spendability conditions. Rather than scripts, a hash of the script is added to the blockchain as a privacy improvement. 10% of Bitcoins are stored using P2SH scripts. MAST is meant to make transactions even smaller. One does not need a Turing-complete language since one only needs to verify and not compute on the blockchain.

Settling outside the main chain

Bitcoin is like a court, you go there for resolution, but you don’t carry all your business in front of the court. Transaction cut-through allows cooperating parties to reduce their fees by eliminating intermediate transactions, A -> B -> C becomes A -> C. Sidechains are like lower courts while Bitcoin main chain is like supreme court of the settlement.

Cut-through + Confidential transactions + Aggregation = Mimblewimble

Cut-through + Payment channels + Hash locked transactions = Lightning

One-way peg like Betacoin gives users a chance to burn Bitcoins and get Betacoins. But given that it is one-way, there is no way for the user to get the Bitcoins back. Therefore, Betacoins become less valuable of choice.

CoinWitness produced first two-way side chain but is not practical right now since the whole system has to be verified under a Zero-knowledge proof, but with SPV it is possible since SPV proofs are simple enough to verify, but there are tons of complications associated with long-chain reorgs.

Zero Knowledge Proofs are slow, but they can be used outside Bitcoin. For example, Alice gives Bob the hash of a key K and a piece of data encrypted with K. Using Zero-knowledge, Bob certified that encrypted solution is correct. Now, Bob sends money using P2SH to who-so-ever who can provide K which hashes to a given hash. A detailed example of a Bitcoin side-chain can be seen at https://github.com/elementsproject

Segregated Witness

Consider a 1-of-2 multi-sig; the transaction ID will depend on who signs, this invalidates successor transactions and is therefore troubling. SegWit solves this in a backward compatible way by making existing signature fields empty and moving them out using P2SH. Non-witness data costs more to store to discourage someone from storing too outside the chain.