Combined summary - Payjoin-in-Potentiam: Externally fund an LSP channel open with one transaction

Combined summary - Payjoin-in-Potentiam: Externally fund an LSP channel open with one transaction

The innovative protocols discussed, namely swap-in-potentiam (SIP) and payjoin-in-potentiam (PIP), aim to enhance the efficiency of channel opening in cryptocurrency transactions on the Lightning Network.

The underlying principle of SIP is that it allows for 0-confirmation (0-conf) off-chain operations given that all inputs are from swap-in-potentiam funds. This stipulation ensures that if the source of funds is not derived from swap-in-potentiam with the same recipient, then a confirmation is required before proceeding. The protocol acknowledges the necessity of a single confirmation for the source of funds, highlighting the simplicity and deployment priority of SIP before considering optimizations for batched fee savings. A key advantage of SIP is its facilitation for Alice, typically operating a mobile wallet, to go offline post-transaction initiation, thus emphasizing the importance of correctness over optimization in common scenarios.

The discussion further introduces the concept of payjoin-in-potentiam (PIP), an advanced protocol designed to reduce the on-chain footprint for channel openings. PIP optimistically assumes the potential for halving the on-chain transaction requirements by incorporating external input from the source of funds into the channel opening process, facilitated by Bob's initiative. This is contrasted with the traditional approach requiring funds to confirm into a swap address prior to channel opening. Moreover, the integration of MuSig2 is explored as a means to eliminate the hard input requirement when Alice becomes active before the payjoin protocol expires, thereby aiming to streamline fund transfers and integrate with Partially Signed Bitcoin Transactions (PSBT).

A notable aspect discussed is the proposal of a specialized protocol over a vendor-specific extension to PSBT for ensuring that all inputs adhere to the swap-in-potentiam criteria. This approach seeks to mitigate security risks associated with under-specifying the PSBT-based extension, which could inadvertently introduce vulnerabilities. The emphasis on maintaining a minimized trust level during the transaction process is evident through the suggestion of a trustless intermediary to mediate disputes and facilitate output substitution, underscoring the objective of enhancing transaction reliability and integrity.

The swap-in-potentiam proposal outlined aims at simplifying the transition of funds from an onchain address to the Lightning Network while upholding trust minimization. This protocol necessitates collaboration between the transacting parties and a Lightning Service Provider (LSP), offering a streamlined method particularly beneficial for mobile wallet users. The incorporation of Payjoin, allowing direct funding of channel opening from the LSP without displaying a swap output address on the blockchain, marks a significant advancement towards optimizing transaction efficiency and privacy.

In summary, the discourse encapsulates the technical and conceptual advancements in cryptocurrency transactions related to the Lightning Network. It underscores the strategic development of protocols aimed at reducing transaction costs, enhancing privacy, and streamlining the channel opening process. The discussions reveal a continuous exploration of integrating innovative mechanisms like MuSig2 with existing transaction standards such as PSBT, reflecting an ongoing commitment to improving the efficacy and accessibility of cryptocurrency transactions within the rapidly evolving digital currency landscape.

Discussion History

bitgould Original Post
March 29, 2024 20:57 UTC
March 29, 2024 22:53 UTC
March 30, 2024 00:06 UTC
March 30, 2024 17:02 UTC
March 30, 2024 23:42 UTC
April 2, 2024 14:52 UTC