On (in)ability to embed data into Schnorr

Andrew Poelstra's discussion raises a nuanced point about the practicality and potential implications of analyzing the embedding rate of signatures within Bitcoin's framework, especially considering that techniques such as grinding can achieve a 12% embedding rate at a relatively low cost. Grinding allows for the modification of nonces and signatures, or nonces and public keys, to achieve desired outcomes without incurring significant expenses. However, Poelstra notes that increasing the signature size to triple its original cost and requiring signatures for address formation could negatively impact functionalities like public derivation and multisig operations with cold keys. Such requirements might not only complicate these processes but could also deter their use in certain contexts.

Moreover, the concern extends to how these practices could amplify issues related to spam, as spammers might leverage the increased embedding rate to utilize more resources, potentially exacerbating existing problems. Poelstra also touches upon the topic of private key leakage within the context of a utxo set, suggesting that the risks associated with such leakage could be mitigated in scenarios where the leaked key is part of a multisig arrangement, such as a 2-of-2 setup with one secure key. This perspective implies that while there are valid concerns regarding security and efficiency within Bitcoin's operational mechanisms, there are also considerations and potential strategies that could address these issues, highlighting the complexity and depth of ongoing discussions in the field of Bitcoin development.