Subject: Re: [bitcoin-dev] MAD-HTLC

From: "David A. Harding" <[email-masked]>
Date: Sun, 28 Jun 2020 12:41:32 -0400

On Tue, Jun 23, 2020 at 03:47:56PM +0300, Stanga via bitcoin-dev wrote:
> On Tue, Jun 23, 2020 at 12:48 PM ZmnSCPxj <[email-masked]> wrote:
> > * Inputs:
> >   * Bob 1 BTC - HTLC amount
> >   * Bob 1 BTC - Bob fidelity bond
> >
> > * Cases:
> >   * Alice reveals hashlock at any time:
> >     * 1 BTC goes to Alice
> >     * 1 BTC goes to Bob (fidelity bond refund)
> >   * Bob reveals bob-hashlock after time L:
> >     * 2 BTC goes to Bob (HTLC refund + fidelity bond refund)
> >   * Bob cheated, anybody reveals both hashlock and bob-hashlock:
> >     * 2 BTC goes to miner
> >
> > [...]
> 
> The cases you present are exactly how MAD-HTLC works. It comprises two
> contracts (UTXOs):
> * Deposit (holding the intended HTLC tokens), with three redeem paths:
>     - Alice (signature), with preimage "A", no timeout
>     - Bob (signature), with preimage "B", timeout T
>     - Any entity (miner), with both preimages "A" and "B", no timeout
> * Collateral (the fidelity bond, doesn't have to be of the same amount)
>     - Bob (signature), no preimage, timeout T
>     - Any entity (miner), with both preimages "A" and "B", timeout T

I'm not these are safe if your counterparty is a miner.  Imagine Bob
offers Alice a MAD-HTLC.  Alice knows the payment preimage ("preimage
A").  Bob knows the bond preimage ("preimage B") and he's the one making
the payment and offering the bond.

After receiving the HTLC, Alice takes no action on it, so the timelock
expires.  Bob publicly broadcasts the refund transaction with the bond
preimage.  Unbeknownst to Bob, Alice is actually a miner and she uses her
pre-existing knowledge of the payment preimage plus her received
knowledge of the bond preimage to privately attempt mining a transaction
that pays her both the payment ("deposit") and the bond ("collateral").

Assuming Alice is a non-majority miner, she isn't guaranteed to
succeed---her chance of success depends on her percentage of the network
hashrate and how much fee Bob paid to incentivize other miners to
confirm his refund transaction quickly.  However, as long as Alice has a
non-trivial amount of hashrate, she will succeed some percentage of the
time in executing this type of attack.  Any of her theft attempts that
fail will leave no public trace, perhaps lulling users into a false
sense of security.

-Dave