Blockstream tests new Bitcoin contract script to revive Bitcoin anti-theft function on the sidechain

At its core, Bitcoin is about giving users more control over their currency.

Bitcoin, often called 'programmable money', has scripts that restrict future spending of bitcoins (as well as controlling variables such as who can spend them). One of these scripts ensures that users can spend bitcoins by checking that the correct signature is used before unlocking and sending the funds.

Last week, Blockstream developer Russell O’Connor revealed that he has been testing some new scripts on the Elements Alpha sidechain (which is pegged to the Bitcoin testnet) that could enable new functionality.

These new kinds of scripts, called “covenants,” potentially open up new possibilities for how bitcoin users can control, limit and spend funds — and how bitcoins can be protected. (This idea has been explored before by researchers Malte Möser, Ittay Eyal and Emin Gun Sirer.)

One of the use cases of these scripts is to help users control their Bitcoin in the event of a hack.

When asked how the new 'contract' would work, Eyal said it could be a boon to people who are concerned about their bitcoin being lost or stolen.

Eyal told CoinDesk:

“These new steps will increase security on the user side in an invaluable way.”

Extending Bitcoin Script

Eyal points out why this idea is noteworthy: it is a script that can restrict how Bitcoin can be spent, and it is a script that has never been implemented in Bitcoin before.

In particular, there are two new contract scripts, and Blockstream explored whether the scripts are valid through parameters and outputs, and whether the transaction is spendable under its constraints.

It is worth noting that in terms of security, Bitcoin’s current script system is quite simple. There are currently many regulations in the Bitcoin system, and because new features can be very dangerous, they take time to test.

This is where sidechains come in handy, because sidechains are not fixed to the main chain.

Since June last year, bitcoin startup Blockstream has been working on interoperable blockchains to experiment with new features for bitcoin, and this example shows how these new chains can be used to test new features.

These proposed operating codes could form the basis for new features and even help bitcoin exchanges and users prevent the loss of stolen funds.

Use Cases

However, while Blockstream is implementing the idea, the idea originally came from researchers at Cornell University.

In February, researchers Malte Möser, Ittay Eyal and Emin Gun Sirer proposed the idea of ​​a ‘Bitcoin Vault’ (implementing their own version of the contract) that would help users get their bitcoin back in the event of a hack. (The idea gained renewed attention after the Bitfinex theft that cost 120,000 BTC).

Eyal explained:

“If attackers can’t control the funds once they’ve stolen them, then they lose the motivation to steal the funds in the first place.”

But he pointed out that contracts and vaults are often at odds with each other: If users create new keys to avoid losing their funds, that means it’s easier to steal them. At the same time, if you create fewer keys, it’s easier to lose your funds.

In the meantime, Blockstream is testing the Treasury as a potential use case, and contract scripts may have other use cases in the future, including lending.

The idea seems to have been dormant for a while, with developers even discussing its feasibility a few months ago.

However, these sidechain tests represent a step toward implementation.

Although contracts and vaults have been questioned by some before (Peter Todd questioned whether such functionality should be included in the code infrastructure layer for scaling Bitcoin), it still looks optimistic.

When asked if these new scripts are safe, Bitcoin Core developer Greg Maxwell responded:

“It is certainly safe if it is done correctly.”