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

The discussion on the use of covenants in blockchain and cryptocurrency transactions brings to light the potential benefits and drawbacks associated with their implementation versus the alternative approach using multisignature (multisig) agreements and pre-signed transactions. It is highlighted that while covenants offer a specialized functionality for transaction protocols, many of their proposed benefits can be emulated through the use of multisig arrangements combined with oracle systems. This emulation approach, however, is not without its trade-offs. For instance, while an evil overlord scenario might only impact uptime guarantees when using multisig solutions, adopting covenants could introduce additional security risks for users seeking honest applications of this technology.

The conversation further argues that any new proposals seeking to enhance blockchain functionality via covenants should provide a compelling rationale as to why such applications are essential and cannot be effectively implemented through multisig oracles. This viewpoint underscores the necessity for a critical evaluation of the unique advantages covenants bring to the table, especially given the inherent compromises and complexities they entail.

Moreover, the discourse sheds light on the experimental nature and widespread interest in covenant technology within the blockchain community. Evidence of this enthusiasm is seen in the number of proof of concepts (PoCs) developed to test various covenant applications, such as pools, vaults, and arks. These projects represent a significant portion of innovation efforts compared to other soft fork initiatives over the past decade. This trend suggests a growing exploration of how covenants might extend or enhance the capabilities of current blockchain infrastructures beyond what is possible with traditional multisig and pre-signed transaction mechanisms.