See this soft-fork proposal from Felix Weiss

https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2016-January/012194.html

Adam

On Apr 12, 2017 5:43 PM, "Oleg Andreev via bitcoin-dev" <
bitcoin-dev@lists.linuxfoundation.org> wrote:

> (This is a sketch, not a fully-formed proposal, just to kick off the
> discussion.)
>
> Confidential Transactions (by GMaxwell & Poelstra) require a new
> accounting model,
> new representation of numbers (EC points as Pedersen commitments) and
> range proofs
> per number. Setting aside performance and bandwidth concerns (3-4Kb per
> output,
> 50x more signature checks), how would we deploy that feature on Bitcoin
> network
> in the most compatible manner?
>
> I'll try to present a sketch of the proposal. I apologize if this
> discussion already
> happened somewhere, although I couldn't find anything on this subject,
> apart from Elements
> sidechain proposal, of course.
>
> At first glance we could create a new extblock and transaction format, add
> a protocol to
> "convert" money into and from such extblock, and commit to that extblock
> from the
> outer block's coinbase transaction. Unfortunately, this opens gates to a
> flood of
> debates such as what should be the block size limit in such block, should
> we
> take opportunity to fix over 9000 of pet-peeve issues with existing
> transactions
> and blocks, should we adjust inflation schedule, insert additional PoW,
> what would
> Satoshi say etc. Federated sidechain suffers from the same issues, plus
> adds
> concerns regarding governance, although it would be more decoupled, which
> is useful.
>
> I tried to look at a possibility to make the change as compatible as
> possible,
> sticking confidential values right into the existing transaction structure
> and
> see how that would look like. As a nice bonus, confidential transactions
> would have
> to fit into the hard-coded 1 Mb limit, preserving the drama around it :-P
>
> We start with a segwit-enabled script versioning and introduce 2 new
> script versions:
> version A has an actual program concatenated with the commitment, while
> version B
> has only the commitment and allows mimblewimble usage (no signatures,
> non-interactive
> cut-through etc). Legacy cleartext amount can nicely act as "min value" to
> minimize
> the range proof size, and range proofs themselves are provided separately
> in the
> segregated witness payload.
>
> Then, we soft fork additional rules:
>
> 1. In non-coinbase tx, sum of commitments on inputs must balance with sum
> of commitments
>    on the outputs plus the cleartext mining fee in the witness.
> 2. Range proof can be confidential, based on borromean ring signature.
> 3. Range proof can be non-confidential, consisting of an amount and raw
> blinding factor.
> 4. Tx witness can have an excess value (cf. MW) and cleartext amount for a
> miner's fee.
> 5. In coinbase tx, total plaintext reward + commitments must balance with
> subsidy,
>    legacy fees and new fees in the witness.
> 6. Extra fees in the witness must be signed with the excess value's key.
>
> The confidential transactions use the same UTXO set, can be co-authored
> with plaintext inputs/outputs
> using legacy software and maybe even improve scalability by compressing
> on-chain transactions
> using mimblewimble cut-through.
>
> The rules above could have been made more complicated with export/import
> logic to allow users
> converting their coins to and from confidential ones, but that would
> require
> more complex support from miners to respect and merge outputs representing
> "plaintext value bank",
> mutate export transactions, which in turn requires introduction of a
> non-malleable TxID
> that excludes miner-adjustable export/import outputs.
>
> The rules above have a nice side effect that miners, being the minters of
> confidential coins,
> can sell them at a premium, which creates an incentive for them to
> actually support
> that feature and work on improving performance of rangeproof validation
> (e.g. in GPUs).
>
> Would love to hear comments and criticism of that approach.
>
> Thanks!
> Oleg.
>
>
>
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