Covenant Use Cases & TXHASH with Steven Roose (SLP541)
Jan 14, 2024
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Steven Roose, an expert in covenant uses and TXHASH, joins Stephan Livera to discuss covenant use cases, TXHASH, the scope of changes, and commercial viability. They explore the benefits and concerns of coin restriction, the advantages of TXHASH over CTV, and the potential of cycling coins. The podcast also covers concerns about unintentional enablement, the comparisons and potential of TXHASH, payment pools, and the commercial viability of covenant use cases.
Transaction templating simplifies lightning network setup and improves security.
Covenant-enabled lightning symmetry enhances scalability and payment features.
Congestion control with covenants allows for flexible fee management and guaranteed payments.
Deep dives
Transaction templating
Transaction templating is a use case enabled by covenants that eliminates the need for pre-signed transactions. Instead of creating pre-signed transactions for off-chain protocols like lightning, participants can use covenant conditions within the existing script to determine spending. This simplifies protocol setup and improves security by removing the need to trust that the other party has deleted their pre-signed transaction.
Lightning symmetry
Lightning symmetry, or LN symmetry, is an upgraded version of the lightning network that benefits from covenants. By using covenant conditions, lightning can handle data and transaction constructions more efficiently and securely. Covenant-enabled lightning symmetries can provide improved scalability and advanced payment features. However, it may require users to be comfortable with the idea of payments that need additional work and fees before being finalized.
Congestion control
Congestion control is a use case that can be achieved using covenants like CTV or TxHash. It involves committing to multiple payments in a single transaction, allowing participants to pay fees and unlock the payments when the fees are more favorable. This can be useful in scenarios where fees fluctuate, allowing users to guarantee payments to others while avoiding high fees. However, its practicality may depend on the level of fee volatility and user comfort with the UX implications.
Vaults: Enhancing Security for Bitcoin Storage
Vaults are considered a vital and secure way to store large amounts of Bitcoin. With the increasing prevalence of Bitcoin theft, vaults offer an additional layer of protection. Vaults allow for a backup clause in case keys are compromised or lost, ensuring that funds can be recovered. Even with multi-signature setups, there is still a risk of losing funds. Vaults mitigate this risk by providing a backup plan for various scenarios. The introduction of the 'upvault' opcode in covenant scripts enables the creation of vaults, adding an extra layer of security to Bitcoin storage.
Payment Pools: Collaborative Bitcoin Transactions
Payment pools, also known as join pools or coin pools, provide a new approach to Bitcoin transactions. Multiple users can come together and pool their funds into a single UTXO. Within the pool, participants can collaboratively reshuffle their balances and make payments to each other without requiring on-chain transactions. This reduces fees and improves efficiency, especially for entities that frequently transact with each other. The use of covenants allows for the seamless creation and management of payment pools. Users can join a pool, make payments, and exit the pool, all while benefiting from the security and simplicity of covenant scripts.
Given the recent discussion on covenants, you might be curious about what actual covenant use cases look like. Joining me today is Steven Roose to help explain covenant uses and TXHASH as well as various objections:
