Statechain implementations

Summary:

The Statechain concept proposes non-custodial off-chain Bitcoin transfer. The current holder of UTXO must obtain the target pubkey for the transfer out-of-band with respect to the SE, or the SE can MITM that. Nadav Kohen raised concerns about an untraceable scam by the Statechain Entity (SE). It involves buying the UTXO, transferring it to someone else, and then stealing the UTXO. The user who had their funds stolen cannot prove to anyone that this has happened since the attack compromises their key. Adding a new user key to the protocol with which they must sign in order for the transfer to be considered valid on the state chain is necessary to trace and prove fraud. Single-use seals can also help prove and trace the fraud. Each SE transfer can involve an "opening" of a seal, followed by a "close" when it is transferred, creating a linear history of ownership. If the SE obtains the full private key x, one way or another, the spend of that UTXO will fall outside this seal-based history, and proof of fraud will be evident. Various improvements including blind signing, a SE-federation, etc are valuable to consider to mitigate security issues. However, the SE must be prevented, one way or another, from "buying the UTXO". The SE cannot be allowed to be both operator of the SE and a customer of it, as this clearly violates the no-receiver collusion principle. Tom Trevethan started working on an implementation of the statechains concept and proposed two main modifications including replacing the 2-of-2 multisig output with a single P2(W)PKH output where the public key shared between the SE and the current owner and using 2-of-2 ECDSA MPC to sign. It is important to note that decrementing timelocks and the existence of a patent assigned to nChain Holdings for "Secure off-chain blockchain transactions" are prior art. The patent application has not been granted, and the international search report rejected it on the grounds of prior art.

Updated on: 2023-06-14T00:14:30.023562+00:00