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Bitcoin Covenants

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Book cover Financial Cryptography and Data Security (FC 2016)

Part of the book series: Lecture Notes in Computer Science ((LNSC,volume 9604))

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Abstract

This paper presents an extension to Bitcoin’s script language enabling covenants, a primitive that allows transactions to restrict how the value they transfer is used in the future. Covenants expand the set of financial instruments expressible in Bitcoin, and enable new powerful and novel use cases. We illustrate two novel security constructs built using covenants.

The first, vaults, focuses on improving the security of private cryptographic keys. Historically, maintaining these keys securely and reliably has been a critical vulnerability for Bitcoin users. We show how covenants enable vaults, which disincentivize key theft by preventing an attacker from gaining full access to stolen funds.

The second construct, poison transactions, is a generally useful mechanism for penalizing double-spending attacks. Bitcoin-NG, a protocol that has been recently proposed to improve Bitcoin’s throughput, latency and overall scalability, requires this feature. We show how covenants enable poison transactions, and detail how Bitcoin-NG can be implemented progressively as an overlay on top of the Bitcoin blockchain.

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Notes

  1. 1.

    A covenant is a special contract in property law that restricts the use of an object, typically restricting the use of land for certain purposes. We adopt the term from earlier discussions on related ideas [22], which are discussed in Sect. 6.

  2. 2.

    We abstract from opcode behavior specific to Bitcoin’s soft-fork upgrade mechanism, namely the need to drop items from the stack afterwards.

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Acknowledgments

The authors thank Glenn Willen for useful conversations, Tim Ruffing and Dominique Schröder for their advice on cryptographic primitives, and the anonymous reviewers for their valuable feedback.

This material is based upon work supported by a fellowship within the FITweltweit programme of the German Academic Exchange Service (DAAD), the German Bundesministerium für Bildung und Forschung (BMBF) under grant agreement No. 13N13505, and the National Science Foundation under Grant No. CNS-1518779 and Grant No. CNS-1561209. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the funding organizations.

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Authors and Affiliations

  1. Department of Information Systems, University of Münster, Münster, Germany

    Malte Möser

  2. Initiative for Cryptocurrencies and Contracts (IC3), Computer Science Department, Cornell University, Ithaca, USA

    Ittay Eyal & Emin Gün Sirer

Authors
  1. Malte Möser
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  2. Ittay Eyal
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  3. Emin Gün Sirer
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Corresponding author

Correspondence to Malte Möser .

Editor information

Editors and Affiliations

  1. Concordia University, Montreal, Québec, Canada

    Jeremy Clark

  2. University College London, London, United Kingdom

    Sarah Meiklejohn

  3. Université du Luxembourg, Luxembourg, Luxembourg

    Peter Y.A. Ryan

  4. Rice University, Houston, Texas, USA

    Dan Wallach

  5. Leibniz Universität Hannover, Hannover, Germany

    Michael Brenner

  6. New Jersey Institute of Technology, Newark, New Jersey, USA

    Kurt Rohloff

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© 2016 International Financial Cryptography Association

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Möser, M., Eyal, I., Gün Sirer, E. (2016). Bitcoin Covenants. In: Clark, J., Meiklejohn, S., Ryan, P., Wallach, D., Brenner, M., Rohloff, K. (eds) Financial Cryptography and Data Security. FC 2016. Lecture Notes in Computer Science(), vol 9604. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-53357-4_9

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  • DOI: https://doi.org/10.1007/978-3-662-53357-4_9

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-662-53356-7

  • Online ISBN: 978-3-662-53357-4

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