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From: Olaoluwa Osuntokun <laolu32@gmail.com>
Date: Fri, 8 Apr 2022 13:48:02 -0400
Message-ID: <CAO3Pvs_-igT37fcD29=ATSRX7dW5mGKrLGrXp=iJjaN_t3NGww@mail.gmail.com>
To: Ruben Somsen <rsomsen@gmail.com>
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Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] Taro: A Taproot Asset Representation Overlay
Precedence: list

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(this might be a double post as it ran into the size limit)

Hi Ruben,

Thanks! I don't really consider things final until we have a good set of
test
vectors in the final set, after which we'd start to transition the set of
documents beyond the draft state.

> Seeing as there's a large amount of overlap with RGB, a protocol which I
have
> examined quite extensively, I believe some of the issues I uncovered in
that
> project also apply here.

I'm happy to hear that someone was actually able to extract enough details
from
the RGB devs/docs to be able to analyze it properly! In the past I tried to
ask
their developers questions about how things like transfers worked[1][2],
but it
seemed either people didn't know, or they hadn't finished the core design
(large TBD sections) as they were working on adding other components to
create
a "new new Internet".

> Furthermore, the Taro script is not enforced by Bitcoin, meaning those wh=
o
> control the Bitcoin script can always choose to ignore the Taro script an=
d
> destroy the Taro assets as a result.

This is correct, as a result in most contexts, an incentive exists for the
holder of an asset to observe the Taro validation rules as otherwise, their
assets are burnt in the process from the PoV of asset verifiers. In the
single
party case things are pretty straight forward, but more care needs to be
taken
in cases where one attempts to express partial application and permits
anyone
to spend a UTXO in question.

By strongly binding all assets to Bitcoin UTXOs, we resolve issues related
to
double spending or duplicate assets, but needs to mind the fact that assets
can
be burnt if a user doesn't supply a valid witness. There're likely ways to
get
around this by lessening the binding to Bitcoin UTXO's, but then the system
would need to be able to collect, retain and order all the set of possible
spends, essentially requiring a parallel network. The core of the system as
it
stands today is pretty simple (which was an explicit design goal to avoid
getting forever distracted by the large design space), with a minimal
implementation being relatively compact given all the Bitcoin context/desig=
n
re-use.

Also one cool trait of the way commitments are designed is that the Taro
commitment impact the final derived taproot output key. As a result,
potential
Script extensions like TAPLEAF_UPDATE_VERIFY can actually be used to furthe=
r
_bind_ Taro transitions at the Bitcoin level, without Bitcoin explicitly
needing to be aware of the Taro rules. In short, covenants can allow Bitcoi=
n
Script to bind Taro state transitions, without any of the logic bleeding
over,
as the covenant just checks for a certain output key, which is a function o=
f
the Taro commitment being present.

> There are two possible designs here: a.) The token history remains
separate =E2=80=93
> Dave receives Alice's 2 tokens, Bob's tokens are split and he receives 2
(or
> 3 from Bob 1 from Alice).  b.) The token history gets merged =E2=80=93 Da=
ve
receives
> 4 tokens (linking the new output with both Alice and Bob's history).

Mechanically, with respect to the way the change/UTXOs work in the system,
both
are expressible: Dave can chose to merge them into a single UTXO (with the
appropriate witnesses included for each of them), or Dave can keep them
distinct in the asset tree. You're correct in that asset issuers may opt to
issue assets in denominations vs allowing them to be fully divisible.
Ultimately, the compatibility with the LN layer will be the primary way to
keep
asset histories compressed, without relying on another trust model, or
relying
on the incentive of an asset issuer to do a "re-genesis" which would
effectively re-create assets in a supply-preserving manner (burn N units,
then
produce a new genesis outpoint for N units). Alternatively, implementations
can
also chose to utilize a checkpointing system similar to what some Bitcoin
full
node clients do today.

>  is that you end up with a linked transaction graph, just like in Bitcoin

This is correct, the protocol doesn't claim to achieve better privacy
guarantees than the base chain. However inheriting this transaction graph
model
imo makes it easier for existing Bitcoin developers to interact with the
system, and all the data structures are very familiar tooling wise. However
any
privacy enhancing protocol used for on-chain top-level Bitcoin UTXOs can
also
be applied to Taro, so people can use things like coinswap and coinjoin,
along
with LN to shed prior coin lineages.

> This implies the location of the Taro tree inside the taproot tree is not
> fixed. What needs to be prevented here is that a taproot tree contains
more
> than one Taro tree, as that would enable the owner of the commitment to
show
> different histories to different people.

Great observation, I patched a similar issue much earlier in the design
process
by strongly binding all signatures to a prevOut super-set (so the outpoint
along with the unique key apth down into the tree), which prevents
duplicating
the asset across outputs, as signature verification would fail.

In terms of achieving this level of binding within the Taro tree itself, I
can
think of three options:

  1. Require the Taro commitment to be in the first/last position within th=
e
  (fully sorted?) Tapscript tree, and also require its sibling to be the
hash
  of some set string (all zeroes or w/e). We'd require the sibling to the
empty
  as the tapscript hashes are sorted before hashing so you sort of lose tha=
t
  final ordering information.

  2. Include the position of the Taro commitment within the tapscript tree
  within the sighash digest (basically the way the single input in the
virtual
  transaction is created from the TLV structure).

  3. Include the position of the Taro commitment within the tapscript tree
as
  part of the message that's hashed to derive asset IDs.

AFAICT, #1 resolves the issue entirely, #2 renders transfers outside of the
canonical history invalid, and #2 minds hte asset ID to the initial positio=
n
meaning you can track a canonical lineage from the very start.

> Finally, let me conclude with two questions. Could you clarify the
purpose of
> the sparse merkle tree in your design?

Sure, it does a few things:

  * Non-inclusion proofs so I can do things like prove to your I'm no longe=
r
    committing to my 1-of-1 holographic beefzard card when we swap.

  * The key/tree structure means that the tree is history independent,
meaning
    that if you and I insert the same things into the tree in a different
    order, we'll get the same root hash. This is useful for things like
    tracking all the issuance events for a given asset, or allowing two
    entities to sync their knowledge/history of a single asset, or a set of
    assets.

  * Each asset/script mapping to a unique location within the tree means
it's
    easy to ensure uniqueness of certain items/commitments (not possible to
    commit to the same asset ID twice in the tree as an example).

  * The merkle-sum trait means I that validation is made simpler, as you
just
    check that the input+output commitment sum to the same value, and I can
    also verify that if we're swapping, then you aren't committing to more
    units that exist (so I make sure I don't get an invalid split).

> And the second question =E2=80=93 when transferring Taro token ownership =
from one
> Bitcoin UTXO to another, do you generate a new UTXO for the recipient or
do
> you support the ability to "teleport" the tokens to an existing UTXO like
how
> RGB does it? If the latter, have you given consideration to timing issues
> that might occur when someone sends tokens to an existing UTXO that
> simultaneously happens to get spent by the owner?

So for interactive transfers, the UTXOs generated as just the ones part of
the
MIMO transaction. When sending via the address format, a new non-dust
output is
created which holds the new commitment, and uses an internal key provided b=
y
the receiver, so only they can move the UTXO. Admittedly, I'm not familiar
with
how the RGB "teleport" technique works, I checked out some slide decks a
while
back, but they were mostly about all the new components they were creating
and
their milestone of 1 million lines of code. Can you point me to a coherent
explanation of the technique? I'd love to compare/contrast so we can analyz=
e
the diff tradeoffs being made here.

Thanks for an initial round of feedback/analysis, I'll be updating the draf=
t
over the next few days to better spell things out and particularly that
commitment/sighash uniqueness trait.

-- Laolu

[1]:
https://twitter.com/roasbeef/status/1330654936074371073?s=3D20&t=3DfeV0kWAj=
J6MTQlFm06tSxA
[2]:
https://twitter.com/roasbeef/status/1330692571736117249?s=3D20&t=3DfeV0kWAj=
J6MTQlFm06tSxA

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<div dir=3D"ltr">(this might be a double post as it ran into the size limit=
)<br><div><br></div><div>Hi Ruben, <br><br>Thanks! I don&#39;t really consi=
der things final until we have a good set of test<br>vectors in the final s=
et, after which we&#39;d start to transition the set of<br>documents beyond=
 the draft state.<br><br>&gt; Seeing as there&#39;s a large amount of overl=
ap with RGB, a protocol which I have<br>&gt; examined quite extensively, I =
believe some of the issues I uncovered in that<br>&gt; project also apply h=
ere. <br><br>I&#39;m happy to hear that someone was actually able to extrac=
t enough details from<br>the RGB devs/docs to be able to analyze it properl=
y! In the past I tried to ask<br>their developers questions about how thing=
s like transfers worked[1][2], but it<br>seemed either people didn&#39;t kn=
ow, or they hadn&#39;t finished the core design<br>(large TBD sections) as =
they were working on adding other components to create<br>a &quot;new new I=
nternet&quot;.<br><br>&gt; Furthermore, the Taro script is not enforced by =
Bitcoin, meaning those who<br>&gt; control the Bitcoin script can always ch=
oose to ignore the Taro script and<br>&gt; destroy the Taro assets as a res=
ult.<br><br>This is correct, as a result in most contexts, an incentive exi=
sts for the<br>holder of an asset to observe the Taro validation rules as o=
therwise, their<br>assets are burnt in the process from the PoV of asset ve=
rifiers. In the single<br>party case things are pretty straight forward, bu=
t more care needs to be taken<br>in cases where one attempts to express par=
tial application and permits anyone<br>to spend a UTXO in question. <br><br=
>By strongly binding all assets to Bitcoin UTXOs, we resolve issues related=
 to<br>double spending or duplicate assets, but needs to mind the fact that=
 assets can<br>be burnt if a user doesn&#39;t supply a valid witness. There=
&#39;re likely ways to get<br>around this by lessening the binding to Bitco=
in UTXO&#39;s, but then the system<br>would need to be able to collect, ret=
ain and order all the set of possible<br>spends, essentially requiring a pa=
rallel network. The core of the system as it<br>stands today is pretty simp=
le (which was an explicit design goal to avoid<br>getting forever distracte=
d by the large design space), with a minimal<br>implementation being relati=
vely compact given all the Bitcoin context/design<br>re-use.<br><br>Also on=
e cool trait of the way commitments are designed is that the Taro<br>commit=
ment impact the final derived taproot output key. As a result, potential<br=
>Script extensions like TAPLEAF_UPDATE_VERIFY can actually be used to furth=
er<br>_bind_ Taro transitions at the Bitcoin level, without Bitcoin explici=
tly <br>needing to be aware of the Taro rules. In short, covenants can allo=
w Bitcoin<br>Script to bind Taro state transitions, without any of the logi=
c bleeding over,<br>as the covenant just checks for a certain output key, w=
hich is a function of<br>the Taro commitment being present.<br><br>&gt; The=
re are two possible designs here: a.) The token history remains separate =
=E2=80=93<br>&gt; Dave receives Alice&#39;s 2 tokens, Bob&#39;s tokens are =
split and he receives 2 (or<br>&gt; 3 from Bob 1 from Alice). =C2=A0b.) The=
 token history gets merged =E2=80=93 Dave receives<br>&gt; 4 tokens (linkin=
g the new output with both Alice and Bob&#39;s history).<br><br>Mechanicall=
y, with respect to the way the change/UTXOs work in the system, both<br>are=
 expressible: Dave can chose to merge them into a single UTXO (with the<br>=
appropriate witnesses included for each of them), or Dave can keep them<br>=
distinct in the asset tree. You&#39;re correct in that asset issuers may op=
t to<br>issue assets in denominations vs allowing them to be fully divisibl=
e.<br>Ultimately, the compatibility with the LN layer will be the primary w=
ay to keep<br>asset histories compressed, without relying on another trust =
model, or relying<br>on the incentive of an asset issuer to do a &quot;re-g=
enesis&quot; which would<br>effectively re-create assets in a supply-preser=
ving manner (burn N units, then<br>produce a new genesis outpoint for N uni=
ts). Alternatively, implementations can<br>also chose to utilize a checkpoi=
nting system similar to what some Bitcoin full<br>node clients do today.<br=
><br>&gt; =C2=A0is that you end up with a linked transaction graph, just li=
ke in Bitcoin<br><br>This is correct, the protocol doesn&#39;t claim to ach=
ieve better privacy<br>guarantees than the base chain. However inheriting t=
his transaction graph model<br>imo makes it easier for existing Bitcoin dev=
elopers to interact with the<br>system, and all the data structures are ver=
y familiar tooling wise. However any<br>privacy enhancing protocol used for=
 on-chain top-level Bitcoin UTXOs can also<br>be applied to Taro, so people=
 can use things like coinswap and coinjoin, along<br>with LN to shed prior =
coin lineages.<br><br>&gt; This implies the location of the Taro tree insid=
e the taproot tree is not<br>&gt; fixed. What needs to be prevented here is=
 that a taproot tree contains more<br>&gt; than one Taro tree, as that woul=
d enable the owner of the commitment to show<br>&gt; different histories to=
 different people.<br><br>Great observation, I patched a similar issue much=
 earlier in the design process<br>by strongly binding all signatures to a p=
revOut super-set (so the outpoint<br>along with the unique key apth down in=
to the tree), which prevents duplicating<br>the asset across outputs, as si=
gnature verification would fail.<br><br>In terms of achieving this level of=
 binding within the Taro tree itself, I can<br>think of three options:<br><=
br>=C2=A0 1. Require the Taro commitment to be in the first/last position w=
ithin the<br>=C2=A0 (fully sorted?) Tapscript tree, and also require its si=
bling to be the hash<br>=C2=A0 of some set string (all zeroes or w/e). We&#=
39;d require the sibling to the empty<br>=C2=A0 as the tapscript hashes are=
 sorted before hashing so you sort of lose that<br>=C2=A0 final ordering in=
formation.<br><br>=C2=A0 2. Include the position of the Taro commitment wit=
hin the tapscript tree<br>=C2=A0 within the sighash digest (basically the w=
ay the single input in the virtual<br>=C2=A0 transaction is created from th=
e TLV structure).<br><br>=C2=A0 3. Include the position of the Taro commitm=
ent within the tapscript tree as<br>=C2=A0 part of the message that&#39;s h=
ashed to derive asset IDs.<br><br>AFAICT, #1 resolves the issue entirely, #=
2 renders transfers outside of the<br>canonical history invalid, and #2 min=
ds hte asset ID to the initial position<br>meaning you can track a canonica=
l lineage from the very start.<br><br>&gt; Finally, let me conclude with tw=
o questions. Could you clarify the purpose of<br>&gt; the sparse merkle tre=
e in your design? <br><br>Sure, it does a few things:<br><br>=C2=A0 * Non-i=
nclusion proofs so I can do things like prove to your I&#39;m no longer<br>=
=C2=A0 =C2=A0 committing to my 1-of-1 holographic beefzard card when we swa=
p.<br><br>=C2=A0 * The key/tree structure means that the tree is history in=
dependent, meaning<br>=C2=A0 =C2=A0 that if you and I insert the same thing=
s into the tree in a different<br>=C2=A0 =C2=A0 order, we&#39;ll get the sa=
me root hash. This is useful for things like<br>=C2=A0 =C2=A0 tracking all =
the issuance events for a given asset, or allowing two<br>=C2=A0 =C2=A0 ent=
ities to sync their knowledge/history of a single asset, or a set of<br>=C2=
=A0 =C2=A0 assets.<br><br>=C2=A0 * Each asset/script mapping to a unique lo=
cation within the tree means it&#39;s<br>=C2=A0 =C2=A0 easy to ensure uniqu=
eness of certain items/commitments (not possible to<br>=C2=A0 =C2=A0 commit=
 to the same asset ID twice in the tree as an example).<br><br>=C2=A0 * The=
 merkle-sum trait means I that validation is made simpler, as you just<br>=
=C2=A0 =C2=A0 check that the input+output commitment sum to the same value,=
 and I can<br>=C2=A0 =C2=A0 also verify that if we&#39;re swapping, then yo=
u aren&#39;t committing to more<br>=C2=A0 =C2=A0 units that exist (so I mak=
e sure I don&#39;t get an invalid split).<br><br>&gt; And the second questi=
on =E2=80=93 when transferring Taro token ownership from one<br>&gt; Bitcoi=
n UTXO to another, do you generate a new UTXO for the recipient or do<br>&g=
t; you support the ability to &quot;teleport&quot; the tokens to an existin=
g UTXO like how<br>&gt; RGB does it? If the latter, have you given consider=
ation to timing issues<br>&gt; that might occur when someone sends tokens t=
o an existing UTXO that<br>&gt; simultaneously happens to get spent by the =
owner?<br><br>So for interactive transfers, the UTXOs generated as just the=
 ones part of the<br>MIMO transaction. When sending via the address format,=
 a new non-dust output is<br>created which holds the new commitment, and us=
es an internal key provided by<br>the receiver, so only they can move the U=
TXO. Admittedly, I&#39;m not familiar with<br>how the RGB &quot;teleport&qu=
ot; technique works, I checked out some slide=C2=A0decks a while<br>back, b=
ut they were mostly about all the new components they were creating and<br>=
their milestone of 1 million lines of code. Can you point me to a coherent<=
br>explanation of the technique? I&#39;d love to compare/contrast so we can=
 analyze<br>the diff tradeoffs being made here.<br><br>Thanks for an initia=
l round of feedback/analysis, I&#39;ll be updating the draft<br>over the ne=
xt few days to better spell things out and particularly that<br>commitment/=
sighash uniqueness trait.<br><br>-- Laolu<br><br>[1]: <a href=3D"https://tw=
itter.com/roasbeef/status/1330654936074371073?s=3D20&amp;t=3DfeV0kWAjJ6MTQl=
Fm06tSxA">https://twitter.com/roasbeef/status/1330654936074371073?s=3D20&am=
p;t=3DfeV0kWAjJ6MTQlFm06tSxA</a><br>[2]: <a href=3D"https://twitter.com/roa=
sbeef/status/1330692571736117249?s=3D20&amp;t=3DfeV0kWAjJ6MTQlFm06tSxA">htt=
ps://twitter.com/roasbeef/status/1330692571736117249?s=3D20&amp;t=3DfeV0kWA=
jJ6MTQlFm06tSxA</a><br></div></div>

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