BIP idea: Timelock-Recovery storage format

The discussion initiated on BitcoinTalk by Oren, following a brief conversation with Ava Chow at BTC++ Taiwan, revolves around the proposition of a Bitcoin Improvement Proposal (BIP) focusing on Timelock-Recovery plans. The motivation behind this idea stems from the complexities and apprehensions associated with storing recovery seeds for Bitcoin, particularly concerning their security and the challenges in handling inheritance. Traditional methods, such as pre-signed transactions to a secondary wallet or custodian, offer a safer alternative due to their immutable nature but come with their own set of limitations, including the need for renewal as the nLocktime approaches.

Oren's solution involves the pre-signing of two specific types of transactions: an Alert/Initiate Transaction and a Recovery Transaction. The former consolidates most funds in the original wallet while transferring a minimal amount to anchor addresses for Child Pays for Parent (CPFP) acceleration purposes. The latter enables the transfer of Bitcoin from the consolidated Unspent Transaction Output (UTXO) to secondary wallets, incorporating a relative locktime to provide users adequate time to act upon the alert transaction. This mechanism is designed primarily for wallets that are not expected to be accessed for extended periods, addressing the issue of renewals and the exclusion of new funds or those spent from the coverage of the timelocked setup.

A notable development in this area is the implementation of the Timelock Recovery plugin for Electrum (merged since version 4.6.0b1), available for review at Electrum. This plugin provides a user-friendly interface for signing the necessary transactions and saving them in either PDF format, complete with detailed instructions for less tech-savvy Bitcoin users, or in JSON format. The focus of the proposed BIP is on standardizing the JSON format, which includes comprehensive details about the transactions, such as raw transaction data, user information, and specific transaction metrics (e.g., txids, fees, input utxos).

Furthermore, the adoption of a standardized JSON format would facilitate compatibility across different wallets and enable the development of applications and servers dedicated to monitoring and initiating timelock-recovery plans. This initiative is underscored by the involvement of RITREK.com, a venture co-founded by Oren, which is actively developing solutions in this domain (RITREK). This proposal underscores the ongoing efforts within the Bitcoin community to enhance security and usability for long-term wallet management, addressing both technical and non-technical users' needs.