Subject: Re: [bitcoin-dev] SAS: Succinct Atomic Swap

From: Lloyd Fournier <[email-masked]>
Date: Tue, 12 May 2020 14:10:47 +0800

Ruben,

In my opinion, this protocol is theoretical breakthrough as well as a
practical protocol. Well done! I want to try and distil the core abstract
ideas here as they appear to me. From my view, the protocol is a
combination of two existing ideas and one new one:

1. In atomic swaps you can make the refund transaction on one chain
dependent on the refund on the other using secret revelation. Thus only one
chain needs to have a timelock and the other refund can be conditioned on a
secret that is revealed when that first refund goes through. (This idea is
in the monero atomic swap [1]).
2. Secret revelations can be used to give unconstrained spending power to
one party. With an adaptor signature, rather than reveal a decryption key
for another signature, you can just make the decryption key your signing
key in the multisig so when you reveal it with the adaptor signautre the
other party gains full knowledge of the private key for the output and can
spend it arbitrarily. (this is just folklore and already what happens in
HTLCs -- though it looks like lightning people are about to get rid of the
unconstrained spend I think).

The combination of these two ideas is novel in itself. The problem with
idea (2) is that your unconstrained spending power over an output doesn't
matter much if there is a pre-signed refund transaction spending from it --
you still have to spend it before the refund becomes valid. But if you
bring in idea (1)  this problem goes away!
However, you are left with a new problem: What if the party with the
timelock never refunds? Then the funds are locked forever.

Here's where the truly novel part comes in. Ruben solves this by extending
the standard *TLC contract:
1. Bob redeem with secret
2. Alice refund after T1
3. Bob redeem without secret after T2

We might call this a "Forced Refund *TLC". Alice must claim the refund or
lose her money. This forces the refund secret revelation through
punishment. If Alice refuses to refund Bob gets the asset he wanted anyway!

The resulting protocol you get from applying these ideas is three
transactions. At the end, one party has their funds in a non HD key output
but if they want that they can just transfer it to an HD output in which
case you get four transactions again. Thus I consider this to be a strict
improvement over the four transaction protocol. Furthermore, one of the
chains does not need a timelock. This is remarkable as the four transaction
atomic swap is one of the most basic and most studied protocols. I
considered it to be kind of "perfect" in a way. It just goes to show that
this field is still very new and there are still things to discover in what
we think is the most well trodden ground.

I don't want to ignore that Ruben presents us with a two transaction
protocol. He made a nice video explaining it here:
https://www.youtube.com/watch?v=TlCxpdNScCA. It is harder to see the
elegance of the idea in the two tx protocol because it involves revocation
and relative timelocks etc. Actually, it is straightforward to naively
achieve a two tx atomic swap with payment channels:
1. Alice and Bob set up payment channels to each other on different chains
2. They atomic swap the balances of the channels off-chain using HTLCs
using the standard protocol.
3. Since one party exclusively owns the funds in each channel the party
with no funds simply reveals their key in the funding OP_CHECKMULTISIG to
the other
4. Both parties now watch the chain to see if the other tries to post a
commitment transactions.

The advantages that Ruben's two tx protocol has over this is that timelocks
and monitoring is only needed on one of the chains. This is nothing to
scoff at but for me the three tx protocol is the most elegant expression of
the idea and the two tx protocol is a more optimised version that might
make sense in some circumstances.

[1] https://github.com/h4sh3d/xmr-btc-atomic-swap/blob/master/README.md

LL