Bitcoin PIPEs v2. Overview and feedback request.

The recently published Bitcoin PIPEs v2 introduces a novel approach to integrating covenants into Bitcoin's Layer 1 without necessitating a soft fork, presenting a significant advancement in blockchain technology. By employing a Decentralized Key Generation (DKG) committee to generate a key through a process that ensures no single entity knows the private key, this method hinges on issuing a ciphertext. This ciphertext unlocks the private key only after the successful verification of a Zero-Knowledge Proof (ZKP), thereby facilitating the verification of ZKPs on Bitcoin L1 in a single transaction. The transition from Functional Encryption-based designs in PIPEs v1 to AADP Witness Encryption in PIPEs v2 marks a pivotal shift. This change not only enhances the feasibility of running such operations for every Bitcoin block but also addresses the storage challenges associated with this technology, suggesting a future reduction in data storage requirements from approximately 330 TB to about 100 GB.

Bitcoin PIPEs v2 aims at revisiting various Bitcoin Improvement Proposals (BIPs) that suggest new opcodes for Bitcoin Script, like OP_CTV and OP_VAULT, which have struggled to gain broad consensus within the community. Through its capability to emulate binary covenants without altering the transaction format or outputs post-key release, PIPEs v2 presents an opportunity to potentially streamline or supersede existing proposals. This innovation opens up new possibilities for applications such as vaults, where funds can be unlocked under specific conditions, and zero-knowledge proofs that attest to the correctness of statements without revealing underlying information.

The practicality of implementing PIPEs v2 is underscored by recent advancements in Witness Encryption, challenging previous notions of impracticality. With the computational process being feasible within the 10-minute block interval of Bitcoin, thanks to parallelization techniques and efficiency improvements, the dominant cost factors are now manageable. Specifically, determinant computation, a critical step in this process, can be executed within the block interval using a robust computing infrastructure. The economic viability of this model is further highlighted by the relatively low execution costs, making real-time covenant emulation a realistic proposition.

This development invites feedback and collaboration from BIP authors and Bitcoin contributors to explore how PIPEs v2 could simplify existing proposals, enhance efficiency, or pave the way for alternative design paradigms within the Bitcoin ecosystem. The shared links, including those to the initial announcement and detailed discussions on platforms such as Delving Bitcoin, provide valuable resources for understanding the potential impacts and technical underpinnings of Bitcoin PIPEs v2.