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CheckTemplateVerify Does Not Scale Due to UTXO's Required For Fee Payment

CheckTemplateVerify Does Not Scale Due to UTXO's Required For Fee Payment

Posted on: February 20, 2024 23:13 UTC

The discourse on Bitcoin's security emphasizes the importance of aligning miners' economic incentives with onchain activities, specifically highlighting the potential risks associated with offchain payments.

It is argued that keeping miners' incentives strictly tied to onchain fees is crucial for maintaining the integrity and true cost representation of transactions on the blockchain. This approach not only ensures transparency in transaction costs but also discourages practices that could undermine the security and decentralization of the network.

The discussion delves into the nuances of using feerate-dependent timelocks (FDTs) as a mechanism to secure Layer 2 protocols. Despite the potential benefits, there's a concern that FDTs could be exploited by miners colluding with Layer 2 operators to manipulate transaction fees and compromise fund security. However, it's noted that such collusion would require a significant portion of the hashpower, making successful attacks highly unlikely without evident and detrimental consequences to the attackers, especially in terms of the asset's value and network trust.

Moreover, the conversation touches upon the parallels between defending against FDT manipulation and double-spend attacks. In both scenarios, optimal security parameters can drastically reduce the likelihood of successful exploitation. For instance, an FDT setup with specific window size and block count parameters is shown to have a negligible chance of being compromised by miners holding less than 45% of the hashpower. This comparison underscores the broader theme that securing the network against various forms of manipulation hinges on preventing undue miner collusion and maintaining robust defense mechanisms.

The inherent risks of relying on offchain payment incentives are further scrutinized, particularly in the context of scaling Bitcoin and preserving its decentralized nature. The correspondence suggests that alternative solutions to prevent forced expiration spam attacks, which do not depend on detecting spikes in onchain fees, would be preferable. Nonetheless, in the absence of such innovations, mechanisms defined by onchain fee dynamics, like FDTs, are viewed as the best available option for mitigating these risks. Ultimately, the discourse reinforces the argument against enabling mechanisms, such as anchor outputs for fee payments, that could inadvertently encourage miners to seek offchain compensation, thereby jeopardizing network security and scalability objectives.

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