Funny AJ mentions the multisig idea, because I know for a fact it's being
used in certain permissioned systems in this exact way. Regulators will
dream up these ideas with or without more useful covenants!

On Mon, Jul 5, 2021 at 9:46 PM Matt Corallo via bitcoin-dev <
bitcoin-dev@lists.linuxfoundation.org> wrote:

> I find this point to be incredibly important. Indeed I, like several
> others, have historically been concerned with
> covenants in the unbounded form. However, as more and more research has
> been done in what they can accomplish, the
> weighting of such arguments naturally has to be reduced. More importantly,
> AJ's point here neuters anti-covanent
> arguments rather strongly.
>
> Matt
>
> On 7/5/21 01:04, Anthony Towns via bitcoin-dev wrote:
> > On Sun, Jul 04, 2021 at 09:02:25PM -0400, Russell O'Connor via
> bitcoin-dev wrote:
> >> Bear in mind that when people are talking about enabling covenants, we
> are
> >> talking about whether OP_CAT should be allowed or not.
> >
> > In some sense multisig *alone* enables recursive covenants: a government
> > that wants to enforce KYC can require that funds be deposited into
> > a multisig of "2 <recipient> <gov_key> 2 CHECKMULTISIG", and that
> > "recipient" has gone through KYC. Once deposited to such an address,
> > the gov can refus to sign with gov_key unless the funds are being spent
> > to a new address that follows the same rules.
> >
> > (That's also more efficient than an explicit covenant since it's all
> > off-chain -- recipient/gov_key can jointly sign via taproot/MuSig at
> > that point, so that full nodes are only validating a single pubkey and
> > signature per spend, rather than having to do analysis of whatever the
> > underlying covenant is supposed to be [0])
> >
> > This is essentially what Liquid already does -- it locks bitcoins into
> > a multisig and enforces an "off-chain" covenant that those bitcoins can
> > only be redeemed after some valid set of signatures are entered into
> > the Liquid blockchain. Likewise for the various BTC-on-Ethereum tokens.
> > To some extent, likewise for coins held in exchanges/custodial wallets
> > where funds can be transferred between customers off-chain.
> >
> > You can "escape" from that recursive covenant by having the government
> > (or Liquid functionaries, or exchange admins) change their signing
> > policy of course; but you could equally escape any consensus-enforced
> > covenant by having a hard fork to stop doing consensus-enforcement (cf
> > ETH Classic?). To me, that looks more like a difference of procedure
> > and difficulty, rather than a fundamental difference in kind.
> >
> > Cheers,
> > aj
> >
> > [0] https://twitter.com/pwuille/status/1411533549224693762
> >
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