Standardizing an exposure classification for existing outputs (pre-BIP)

In a recent communication, essential distinctions were clarified regarding the handling and classification of cryptocurrency statuses that could significantly influence wallet software specifications and user actions. The discussion points out that risk scoring was intentionally omitted from earlier drafts due to its subjective nature and the difficulty in observing it directly on-chain. Instead, the focus shifted toward recommending specific actions based on the exposure level of the cryptocurrency.

The proposed system categorizes coin exposure into four levels: EXPOSED_AT_REST, EXPOSED_ON_SPEND, NOT_EXPOSED, and UNDETERMINED. For coins labeled as EXPOSED_AT_REST, the recommendation is to transition them to a safer output type as soon as a trustworthy option becomes available. In the interim, users should refrain from increasing their holdings in this category. When coins are categorized as EXPOSED_ON_SPEND, no action is necessary while the coins remain unspent; however, once spent, the entire balance should be swept, and no funds should return to the original state since the initial transaction alters their status to AT_REST. Coins deemed NOT_EXPOSED require no specific actions, whereas those marked UNDETERMINED should be treated as if they are AT_REST until further classification can be made by the software.

Additionally, the discourse introduces a proposal for version 0.4.0 of the wallet standard, which includes an informative appendix. This appendix aims to map each exposure level to a minimum suggested action (SHOULD-level) without conflicting with existing wallet policies. This approach helps standardize baseline recommendations while avoiding the complexities of integrating risk scoring into the specification. Notably, the implementation of such mappings has already been tested and proven effective in production environments through advice strings correlating with each level of exposure.

Moreover, the discussion solicits feedback on whether the granularity provided by this classification system is practical from the perspective of wallet developers and if including these recommended actions as machine-readable keys would be beneficial, as opposed to simply providing them in prose format. This feedback is crucial as it will guide the final enhancements to the upcoming standard update, which also addresses prior issues raised concerning P2TR in version 0.3.0.