Post-Signature Cross-Input Scripting Using the Taproot Annex

The discussion centers on the application and benefits of introspection in bitcoin transactions, specifically within the context of creating non-interactive, two-sided markets without the need for trusted escrow agents. The primary focus is on enabling users to make offers to buy or sell assets, such as tokens or equity in bitcoin-aligned companies, using a single transaction signature. This process addresses the inefficiency and practical limitations of current bidding systems, where a bidder must produce separately signed PSBTs (Partially Signed Bitcoin Transactions) for each offer, a method that becomes impractical when dealing with thousands of UTXOs (Unspent Transaction Outputs).

Introspection, particularly through the use of an opcode that allows for the examination of transaction details, is proposed as a solution to streamline this process. By creating a staging transaction with a taproot output that anyone can spend by satisfying one of many possible locking scripts, and then using introspection to commit each script to a single transaction template, a bidder can effectively broadcast an offer that can be accepted by any seller who meets the criteria. This method simplifies the process to two transactions: the initial offer and the acceptance transaction, significantly reducing complexity and potentially increasing market liquidity and participation.

However, the proposal also acknowledges potential drawbacks, specifically the risk of enabling recursive covenants through the use of opcodes that allow for full introspection of spent outpoints. To mitigate this, it is suggested that introspection during "delegation" or subscripting should be designed in such a way as not to enable recursive covenants. This would involve limiting the opcode's ability to encumber a UTXO, thereby preventing multi-transaction covenants while still adding significant expressivity to PSBT offers.

Further expanding on the utility of introspection, additional use cases are presented, including non-interactive multi-input and multi-output offers. These scenarios demonstrate how introspection can facilitate more complex transaction types in a single step, enhancing the flexibility and functionality of bitcoin transactions. By allowing each input to commit to the presence of others, or enabling more generic alternatives to proposed sighash types, introspection could serve as a powerful tool in broadening the scope of what is possible within the bitcoin protocol, all while maintaining security and decentralization principles.