CTV+CSFS: Can we reach consensus on a first step towards covenants?

The discussion revolves around the potential application of CTV (CheckTemplateVerify) to enhance the Liquid timelock-fallback script, a mechanism aimed at improving the process by which Bitcoin users transition to the Liquid sidechain. This transition involves users sending coins to a script, which later allows Liquid custodians to spend these funds under specific conditions, notably during a peg-out back to Bitcoin. This script incorporates a timelock feature requiring the spending of coins within a 28-day window (or 4032 blocks) to prevent the necessity for an emergency recovery path to become active, presenting a significant trade-off between fund availability and security.

A critical examination of using CTV in this context reveals several complexities and potential risks. The implementation of CTV would necessitate that the receiving address for funds is crafted with the future transaction's specifics known in advance, including the exact amount of coins to be sent. This requirement introduces a reliance on the sender to use precisely the amount previously communicated, raising concerns about the possibility of funds being inadvertently locked or excess amounts burned as fees. Moreover, there is a necessity for trust that the address will not be reused with different amounts in the future, posing challenges in user behavior and security practices.

The proposition of employing CTV for improving the Liquid sidechain's functionality is met with skepticism, primarily due to the practical and security-related implications it entails. Despite the theoretical benefits of such an integration, the real-world application could result in more harm than benefit, casting doubts on its feasibility and advisability for Liquid or Liana engineers to adopt. Additionally, the critique extends to questioning the validity of promoting a CTV soft fork based on these premises, suggesting a cautious approach towards its implementation in such contexts. For further exploration of the technical intricacies and the emergency recovery procedure involved, additional resources are available, including Liquid’s documentation which can be found here and discussions on using covenants for recovery at this link.