delvingbitcoin

Covenant tools softfork

Covenant tools softfork

Original Postby LLFourn

Posted on: October 5, 2023 01:05 UTC

The discussion revolves around the optimization of Discreet Log Contracts (DLCs) and their current limitations in terms of scalability and on-chain footprint.

The enhancement in DLC efficiency is primarily geared towards reducing the off-chain operations required by users to generate and store data. However, this does not significantly impact the on-chain footprint of DLCs, which remains a concern given that every DLC-based trade necessitates an on-chain anchor. This scalability issue is exacerbated by the fact that using the same anchor for multiple trades is only feasible when trading with the same partners. While centralized trading clearinghouses offer a solution by pairing any seller with any buyer without the need for trust, DLCs lack proposed solutions to overcome these scalability challenges. Furthermore, the performance issues associated with DLCs hinder their widespread adoption, as the user experience suffers due to the significant computational and bandwidth requirements. A proposed workaround involves utilizing multiple outputs for the DLC funding transaction, thereby reducing the computation and bandwidth demands at the expense of increased on-chain data.

The concept of non-interactive channel openings is also explored, drawing comparisons to the "swap in potentiam" proposal. Both concepts aim to simplify the process of opening channels but face limitations due to the trade-offs they entail. Non-interactive channel openings require prior knowledge of the transaction value, posing risks if the expected amount is not received, potentially leading to lost funds. On the other hand, "swap in potentiam" allows for flexibility in terms of the transaction value but necessitates two transactions for channel opening, making it impractical for use as a primary wallet address. These challenges underscore the need for more effective solutions to facilitate easier creation of payment channels, as the current proposals do not fully address the user and developer needs for simplicity and efficiency in Bitcoin services.