Babilonia - probabilistic coinjoin and covert betting

The protocol is characterized by its small onchain footprint, which involves only two payment-size transactions typically requiring one confirmation, though occasionally a third might be necessary without further negotiation. This system is designed to be indistinguishable from normal payments or payjoins under typical circumstances, effectively facilitating a fair bet between two participants invisibly.

The core of this protocol is its use of very simple Zero-Knowledge Proof (ZKP) techniques, which do not rely on complex cryptographic machinery. It operates similarly to payjoins, albeit it could be viewed as involving two such operations depending on the perspective. An interesting aspect of this protocol is the concept of "pot sweeteners," which allows one party to incentivize another without leaving identifiable marks on the transactions, unlike other methods such as those used in Joinmarket. This feature underscores the protocol's ability to facilitate value transfer discreetly, contributing to what might be described as a steganographic obfuscation effect, even in transactions unrelated to tangible goods like coffee or alpaca socks.

Further technical insights into the protocol reveal the use of decoys in BIP324 traffic, allowing two nodes to negotiate without visibility, which addresses potential Sybil attacks effectively. For practical implementation, the protocol's code, primarily authored using LLM coding with minimal human input, is available for review and testing here. Although the current documentation may not be fully polished for general consumption, the developer indicates potential updates depending on community interest.

The protocol also demonstrates promising applications in swaps, offering potentially improved properties though with some tradeoffs. These capabilities and the theoretical underpinnings can be explored more fully through both the Babilonia paper and direct examination of protocol executions provided in example transactions on the Signet test network, viewable here and here. These developments invite further discussion and analysis from the cryptography and blockchain community to explore the full range of applications and implications of this innovative protocol.