Author: Billy Tetrud 2022-02-12 15:59:03
Published on: 2022-02-12T15:59:03+00:00
The discussion on the bitcoin-dev mailing list revolves around the potential harm recursive covenants could cause to the fungibility of individual UTXOs. While some argue that recursive covenants are not an issue, others express concern about unbounded recursion in combination with too much generality/flexibility in what types of conditions future UTXOs can be encumbered with based on the restriction of such covenants. In particular, the hypothetical construct that was presented involves perpetually requiring any spend from a covenant to be sent to a script involving a specific key from an authority figure, preventing by consensus any removal of that central authorities involvement in control over that UTXO. This could introduce dangerous implications to the fungibility of individual UTXOs by introducing a totally different risk model in being paid with such a coin compared to any other coin not encumbered by such a condition. Furthermore, it could potentially introduce a shift in the scope of what a 51% attack could accomplish in terms of permanent consequences attempting to coerce coins into such covenants. However, some argue that being able to say "sorry, your money isn't good here" is at the heart of Bitcoin's security, and if someone can coerce you into using another currency, you've already lost. Additionally, while encumbering coins in a way that devalues them may reduce the supply available, the amount of value lost by those encumbered is gained by the rest of the coins. It is also noted that in the case of a multisig/non-consensus based system, exit from that restriction is still possible under the consensus rules of the protocol. There is some discussion about limiting operations in bitcoin script to "verification" (vs. "computation") to the extent practical, and instead encouraging general computation be done off-chain. However, this may come at the cost of precluding experimentation and probably requiring more soft-forking. Some feel that CTV is a good solution, as it buys a lot of functionality without increasing the "surface area" of script's design. Overall, there are differing opinions on the potential harm recursive covenants could cause to the fungibility of individual UTXOs, but some express concern about the dangerous implications of introducing a totally different risk model in being paid with such a coin compared to any other coin not encumbered by such a condition.
Updated on: 2023-06-15T16:41:31.530864+00:00