Hi all,

On Sat, Jun 10, 2023 at 9:43 AM Joost Jager <joost.jager@gmail.com> wrote:

> However, the primary advantage I see in the annex is that its data isn't
> included in the calculation of the txid or a potential parent commit
> transaction's txid (for inscriptions). I've explained this at [1]. This
> feature makes the annex a powerful tool for applications that would ideally
> use covenants.
>
> The most critical application in this category, for me, involves
> time-locked vaults. Given the positive reception to proposals such as
> OP_VAULT [2], I don't think I'm alone in this belief. OP_VAULT is probably
> a bit further out, but pre-signed transactions signed using an ephemeral
> key can fill the gap and improve the safeguarding of Bitcoin in the short
> term.
>
> Backing up the ephemeral signatures of the pre-signed transactions on the
> blockchain itself is an excellent way to ensure that the vault can always
> be 'opened'. However, without the annex, this is not as safe as it could
> be. Due to the described circular reference problem, the vault creation and
> signature backup can't be executed in one atomic operation. For example,
> you can store the backup in a child commit/reveal transaction set, but the
> vault itself can be confirmed independently and the backup may never
> confirm. If you create a vault and lose the ephemeral signatures, the funds
> will be lost.
>
> This use case for the annex has been labeled 'speculative' elsewhere. To
> me, every use case appears speculative at this point because the annex
> isn't available. However, if you believe that time-locked vaults are
> important for Bitcoin and also acknowledge that soft forks, such as the one
> required for OP_VAULT, aren't easy to implement, I'd argue that the
> intermediate solution described above is very relevant.
>

To support this use case of the taproot annex, I've create a simple demo
application here: https://github.com/joostjager/annex-covenants

This demo shows how a coin can be spent to a special address from which it
can - at a later stage - only move to a pre-defined final destination. It
makes use of the annex to store the ephemeral signature for the presigned
transaction so that the coin cannot get lost. This is assuming that nodes
do not prune witness data en masse and also that the destination address
itself is known.

The application may not be the most practically useful, but more advanced
covenants such as time-locked vaults can be implemented similarly.

Hopefully this further raises awareness of the on-chain ephemeral signature
backup functionality that the annex uniquely enables.

Joost