Author: Chris Belcher 2022-05-16 10:26:45
Published on: 2022-05-16T10:26:45+00:00
The use of fidelity bonds is proposed as a means to create trust-minimized federations for chaumian ecash servers or sidechains. Fidelity bonds are a way to deliberately sacrifice bitcoin value in a way that can be proven to a third party. This system has already been deployed in JoinMarket since August 2021, and at the time of writing about 600 btc have been locked up, some for several years. The value of a fidelity bond is calculated as a greater-than-linear power of the bitcoin sacrifice, which creates a strong incentive for the different fidelity bonds to actually be controlled by different people, because anyone behaving rationally will put all their bitcoins into just one fidelity, not split them up over many bonds. As a sybil attacker needs to distribute their bitcoins over many different bonds, they are mathematically punished. Fidelity bonds don't solve the trust issue as someone with a big fidelity bond could still steal funds from the ecash server or sidechain using multisig keys they control. Rather, fidelity bonds strongly incentivize that the different fidelity bond owners are actually different people. Another value-add of fidelity bonds is they are very much in keeping with the cypherpunk ethos, as anyone can create a fidelity bond and advertise it in the market. It is suggested that such a scheme would work by having each fidelity bond owner create a key in the multisig scheme, and transaction fees from the sidechain or ecash server are divided amongst the fidelity bonds in proportion to their fidelity bond value.
Updated on: 2023-05-22T20:02:40.816892+00:00