Improving JoinMarket's resistance to sybil attacks using fidelity bonds

Summary:

The discussion on bitcoin-dev mailing list revolved around the use of fidelity bonds, and whether rented TXO fidelity bonds would increase centralization risk and decrease privacy. The formula for fidelity bonds provides a strong incentive for profit-motivated makers to use all their coins with just one maker, not spread them out over many makers. The attacker can derive additional value from the use of locked utxo - the deanonimyzation capabilities. If M is profit-driven and non-ideological, it can rent out all of its coins to A as a package, for the price X, and get the same value without running a maker and dedicating any resources and time to it, not incurring any operational expenses. There is a risk that an attacker can rent coins from several entities to create a more 'powerful' maker, leading to centralization risks.However, renting out fidelity bonds doesn't avoid the sacrifice of value, which is the paid rent, required by the fidelity bond scheme, thus making the cost similar to just buying the bitcoins and locking them. Moreover, centralization and decentralization are not ends in themselves, the main aim in JoinMarket is to improve privacy while keeping other properties of bitcoin like censorship resistance. A single maker can never deanonymize coinjoins no matter how valuable their bond is, because takers always choose multiple makers, and all of them need to be controlled by the sybil attacker for the attack to succeed.While rented TXOs do destroy the effect of "A long-term holder probably won't want to attack a system like JoinMarket which makes his own investment coins more private and more fungible", they are not the main effect that would protect JoinMarket's privacy. The cost, which for real-life numbers would be about 45-120 bitcoin sent to burner outputs, is the main effect that protects JoinMarket's privacy. Therefore, rented TXOs may be an argument against using coin age as a way to create fidelity bonds. Hodlers would be far less likely to rent out their coins if they have to specifically move them to a special time-locked address. It is also likely that fidelity bond creators will need to install and run JoinMarket anyway for privacy reasons, as the TXOs used in fidelity bonds are revealed to the world.

Updated on: 2023-05-20T20:51:14.907492+00:00