On the possibility of evil covenants and implications for soft fork proposals

The discussion initiates with an examination of the Coinbase Vault, highlighting its two-phase security measure. Initially, it requires an authorized signer to approve a transaction within 24 hours; failing which, the transaction does not proceed. Following this approval, there is a subsequent 48-hour window during which the transaction can be canceled. This mechanism draws a parallel to the reactive security model, where in the Coinbase scenario, notifications are sent to both the primary and secondary inboxes of the user. In contrast, the Bitcoin Improvement Proposal (BIP) 345, presents an on-chain transaction visibility model, allowing users to cancel transactions by transferring funds to a cold wallet within a predefined time frame.

The comparison extends to operational differences between these systems, notably that the Coinbase model supports multiple cryptocurrencies, unlike BIP 345 which is specific to Bitcoin. The document also sheds light on the challenge of deciphering the actual functionalities behind marketing materials for such security features, indicating a degree of complexity in understanding how Coinbase Vault operates. Additionally, there's an acknowledgment of the absence of clarity concerning the adoption rate and effectiveness of the Coinbase Vault.

The narrative further delves into consensus mechanisms capable of integrating SMS validation before fund transfers, suggesting that setting up a system akin to a watchtower to monitor blockchain transactions and trigger SMS notifications is technologically feasible. This approach leverages research focused on executing such monitoring discreetly, without prematurely revealing the monitoring criteria. However, the reliability and cost implications of utilizing SMS as a notification medium are questioned, hinting at the potential preference for more reliable and cost-effective alternatives. Overall, the discourse encapsulates the intricacies of implementing secure transactional mechanisms within digital currency platforms, juxtaposing the Coinbase Vault’s method against a theoretical framework proposed in BIP 345, while also pondering over the practicality of consensus proposals enabling SMS validations.