Hey Z-man, Antoine,

Thank you for your feedback, responses inline.

z-man:

> Then if I participate in a batched splice, I can disrupt the batched
> splice by broadcasting the old state and somehow convincing miners to
> confirm it before the batched splice.

Correct, I didn't mention it in my post but batched splices cannot use
0-conf, the transaction must be confirmed to remove the risk of double
spends using commit txs associated with the previous funding tx.

But interestingly, with the protocol I drafted, the LSP can finalize and
broadcast the batched splice transaction while users are offline. With a
bit of luck, when the users reconnect, that transaction will already be
confirmed so it will "feel 0-conf".

Also, we need a mechanism like the one you describe when we detect that
a splice transaction has been double-spent. But this isn't specific to
batched transactions, 2-party splice transactions can also be double
spent by either participant. So we need that mechanism anyway? The spec
doesn't have a way of aborting a splice after exchanging signatures, but
you can always do it as an RBF operation (which actually just does a
completely different splice). This is what Greg mentioned in his answer.

> part of the splice proposal is that while a channel is being spliced,
> it should not be spliced again, which your proposal seems to violate.

The spec doesn't require that, I'm not sure what made you think that.
While a channel is being spliced, it can definitely be spliced again as
an RBF attempt (this is actually a very important feature), which double
spends the other unconfirmed splice attempts.

ariard:

> It is uncertain to me if secure fee-bumping, even with future
> mechanisms like package relay and nversion=3, is robust enough for
> multi-party transactions and covenant-enable constructions under usual
> risk models.

I'm not entirely sure why you're bringing this up in this context...
I agree that we most likely cannot use RBF on those batched transactions
we will need to rely on CPFP and potentially package relay. But why is
it different from non-multi-party transactions here?

> See test here:
> https://github.com/ariard/bitcoin/commit/19d61fa8cf22a5050b51c4005603f43d72f1efcf

I'd argue that this is quite different from the standard replacement
cycling attack, because in this protocol wallet users can only
unilaterally double-spend with a commit tx, on which they cannot set
the feerate. The only participant that can "easily" double-spend is
the exchange, and they wouldn't have an incentive to here, users are
only withdrawing funds, there's no opportunity of stealing funds?

Thanks,
Bastien

Le mar. 17 oct. 2023 à 21:10, Antoine Riard <antoine.riard@gmail.com> a écrit :
Hi Bastien,

> The naive way of enabling lightning withdrawals is to make the user
> provide a lightning invoice that the exchange pays over lightning. The
> issue is that in most cases, this simply shifts the burden of making an
> on-chain transaction to the user's wallet provider: if the user doesn't
> have enough inbound liquidity (which is likely), a splice transaction
> will be necessary. If N users withdraw funds from an exchange, we most
> likely will end up with N separate splice transactions.

It is uncertain to me if secure fee-bumping, even with future mechanisms like package relay and nversion=3, is robust enough for multi-party transactions and covenant-enable constructions under usual risk models.

See test here:
https://github.com/ariard/bitcoin/commit/19d61fa8cf22a5050b51c4005603f43d72f1efcf

Appreciated expert eyes of folks understanding both lightning and core mempool on this.
There was a lot of back and forth on nversion=3 design rules, though the test is normally built on glozow top commit of the 3 Oct 2023.

Best,
Antoine

Le mar. 17 oct. 2023 à 14:03, Bastien TEINTURIER <bastien@acinq.fr> a écrit :
Good morning list,

I've been trying to design a protocol to let users withdraw funds from
exchanges directly into their lightning wallet in an efficient way
(with the smallest on-chain footprint possible).

I've come to the conclusion that this is only possible with some form of
covenants (e.g. `SIGHASH_ANYPREVOUT` would work fine in this case). The
goal of this post is to explain why, and add this usecase to the list of
useful things we could do if we had covenants (insert "wen APO?" meme).

The naive way of enabling lightning withdrawals is to make the user
provide a lightning invoice that the exchange pays over lightning. The
issue is that in most cases, this simply shifts the burden of making an
on-chain transaction to the user's wallet provider: if the user doesn't
have enough inbound liquidity (which is likely), a splice transaction
will be necessary. If N users withdraw funds from an exchange, we most
likely will end up with N separate splice transactions.

Hence the idea of batching those into a single transaction. Since we
don't want to introduce any intermediate transaction, we must be able
to create one transaction that splices multiple channels at once. The
issue is that for each of these channels, we need a signature from the
corresponding wallet user, because we're spending the current funding
output, which is a 2-of-2 multisig between the wallet user and the
wallet provider. So we run into the usual availability problem: we need
signatures from N users who may not be online at the same time, and if
one of those users never comes online or doesn't complete the protocol,
we must discard the whole batch.

There is a workaround though: each wallet user can provide a signature
using `SIGHASH_SINGLE | SIGHASH_ANYONECANPAY` that spends their current
funding output to create a new funding output with the expected amount.
This lets users sign *before* knowing the final transaction, which the
exchange can create by batching pairs of inputs/outputs. But this has
a fatal issue: at that point the wallet user has no way of spending the
new funding output (since it is also a 2-of-2 between the wallet user
and the wallet provider). The wallet provider can now blackmail the user
and force them to pay to get their funds back.

Lightning normally fixes this by exchanging signatures for a commitment
transaction that sends the funds back to their owners *before* signing
the parent funding/splice transaction. But here that is impossible,
because we don't know yet the `txid` of the batch transaction (that's
the whole point, we want to be able to sign before creating the batch)
so we don't know the new `prevout` we should spend from. I couldn't find
a clever way to work around that, and I don't think there is one (but
I would be happy to be wrong).

With `SIGHASH_ANYPREVOUT`, this is immediately fixed: we can exchange
anyprevout signatures for the commitment transaction, and they will be
valid to spend from the batch transaction. We are safe from signature
reuse, because funding keys are rotated at each splice so we will never
create another output that uses the same 2-of-2 script.

I haven't looked at other forms of covenants, but most of them likely
address this problem as well.

Cheers,
Bastien
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