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From: =?UTF-8?Q?Johan_Tor=C3=A5s_Halseth?= <johanth@gmail.com>
Date: Thu, 21 Dec 2023 14:34:36 +0100
Message-ID: <CAD3i26BT-idOLOSZ9o2f1EnbQSt2GYAC=2mVp0GGSZ5uUakLBg@mail.gmail.com>
To: Antoine Riard <antoine.riard@gmail.com>
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Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>,
 "lightning-dev\\\\@lists.linuxfoundation.org"
 <lightning-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] HTLC output aggregation as a mitigation for tx
 recycling, jamming, and on-chain efficiency (covenants)
Precedence: list

> Bob can craft a HTLC-preimage spend of the single offered output spending=
 one of 0.1 BTC HTLC payout (and revealing its preimage) while burning all =
the value as fee. This replaces out Alice's honest HTLC-timeout out of netw=
ork mempools, are they're concurrent spend. Bob can repeat this trick as lo=
ng as there is HTLC "payout" remaining in the offered set, until he's being=
 able to do a HTLC off-chain double-spend of the 1 BTC HTLC "payout".

What do you mean by "do a HTLC off-chain double-spend of the 1 BTC
HTLC"? Agreed on every detail up to this point.

Note that every time Bob replaces Alice's timeout tx, he reveals a
preimage that Alice can use to settle her incoming HTLC, so for those
Alice loses nothing, Bob loses the HTLC value to fees.

I believe for Bob to be able to profit from this, he would need to
delay all of Alice's transactions until the timelock on Alice's
incoming HTLC expires (CLTV delta blocks). Is this what you mean by
"off-chain double spend"?

Anyways, this means that Bob will have to pay ~next block fees each
block in the delta period (assuming Alice is eager to get into the
block since the timelocks are expiring on her incoming HTLCs), and
burn the value of an HTLC for every such transaction.

However, I think it is possible to make this very risky for Bob to
play out, based on a simple fact:
Alice can claim all the expired HTLCs cheaply (1 input 1 output tx, no
merkle paths or preimages needed), and she is game theoretically
willing to burn almost all of it to fees to get it confirmed before
expiry. So for the last 1 BTC HTLC, she could pay ~0.9 BTC to fees,
which Bob couldn't compete with by burning the much smaller HTLCs.
However, Bob could of course grief Alice by making her do this, but
unsure if that's rational.


On Sun, Dec 17, 2023 at 11:56=E2=80=AFPM Antoine Riard <antoine.riard@gmail=
.com> wrote:
>
> Hi Johan,
>
> > Is this a concern though, if we assume there's no revoked state that
> > can be broadcast (Eltoo)? Could you share an example of how this would
> > be played out by an attacker?
>
> Sure, let's assume no revoked state can be broadcast (Eltoo).
>
> My understanding of the new covenant mechanism is the aggregation or coll=
apsing of all HTLC outputs in one or at least 2 outputs (offered / received=
).
> Any spend of an aggregated HTLC "payout" should satisfy the script lockin=
g condition by presenting a preimage and a signature.
> An offerd aggregated HTLC output might collapse a M number of HTLC "payou=
t", where M is still limited by the max standard transaction relay, among o=
ther things.
>
> The offered-to counterparty can claim any subset N of the aggregation M b=
y presenting the list of signatures and preimages (How they're feeded to th=
e spent script is a covenant implementation detail). However, there is no g=
uarantee that the offered-to counterparty reveal "all" the preimages she is=
 awarded off. Non-spent HTLC outputs are clawback to a remainder subset of =
M, M'.
>
> I think this partial reveal of HTLC payout preimages still opens the door=
 to replacement cycling attacks.
>
> Let's say you have 5 offered HTLC "payouts" between Alice and Bob aggrega=
ted in a single output, 4 of value 0.1 BTC and 1 of value 1 BTC. All expire=
 at timelock T.
> At T, Alice broadcasts an aggregated HTLC-timeout spend for the 5 HTLC wi=
th 0.0.1 BTC on-chain fee.
>
> Bob can craft a HTLC-preimage spend of the single offered output spending=
 one of 0.1 BTC HTLC payout (and revealing its preimage) while burning all =
the value as fee. This replaces out Alice's honest HTLC-timeout out of netw=
ork mempools, are they're concurrent spend. Bob can repeat this trick as lo=
ng as there is HTLC "payout" remaining in the offered set, until he's being=
 able to do a HTLC off-chain double-spend of the 1 BTC HTLC "payout".
>
> This stealing gain of the 1 BTC HTLC "payout" covers what has been burned=
 as miners fees to replace cycle out Alice's sequence of honest HTLC-timeou=
t.
>
> And it should be noted that Bob might benefit from network mempools conge=
stion delaying the confirmation of his malicious low-value high-fee HTLC-pr=
eimage transactions.
>
> > I'm not sure what you mean here, could you elaborate?
>
> See https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2023-December=
/022191.html and my answer there.
> I think "self-sustained" fees is one only part of the solution, the other=
 part being the sliding delay of the HTLC timelock based on block feerate.
> Otherwise, a replacement cycling attacker can always benefit from network=
 mempools congestion spontaneously pushing out a malicious cycling transact=
ion out of block templates.
>
> > That sounds possible, but how would you deal with the exponential
> > blowup in the number of combinations?
>
> In a taproot-world, "swallow the bullet" in terms of witness size growth =
in case of non-cooperative closure.
> I think this is where introducing an accumulator at the Script level to e=
fficiently test partial set membership would make sense.
> Note, exponential blowup is an issue for mass non-coordinated withdrawals=
 of a payment pool too.
>
> Best,
> Antoine
>
>
> Le lun. 11 d=C3=A9c. 2023 =C3=A0 09:17, Johan Tor=C3=A5s Halseth <johanth=
@gmail.com> a =C3=A9crit :
>>
>> Hi, Antoine.
>>
>> > The attack works on legacy channels if the holder (or local) commitmen=
t transaction confirms first, the second-stage HTLC claim transaction is fu=
lly malleable by the counterparty.
>>
>> Yes, correct. Thanks for pointing that out!
>>
>> > I think one of the weaknesses of this approach is the level of malleab=
ility still left to the counterparty, where one might burn in miners fees a=
ll the HTLC accumulated value promised to the counterparty, and for which t=
he preimages have been revealed off-chain.
>>
>> Is this a concern though, if we assume there's no revoked state that
>> can be broadcast (Eltoo)? Could you share an example of how this would
>> be played out by an attacker?
>>
>> > I wonder if a more safe approach, eliminating a lot of competing inter=
ests style of mempool games, wouldn't be to segregate HTLC claims in two se=
parate outputs, with full replication of the HTLC lockscripts in both outpu=
ts, and let a covenant accepts or rejects aggregated claims with satisfying=
 witness and chain state condition for time lock.
>>
>> I'm not sure what you mean here, could you elaborate?
>>
>> > I wonder if in a PTLC world, you can generate an aggregate curve point=
 for all the sub combinations of scalar plausible. Unrevealed curve points =
in a taproot branch are cheap. It might claim an offered HTLC near-constant=
 size too.
>>
>> That sounds possible, but how would you deal with the exponential
>> blowup in the number of combinations?
>>
>> Cheers,
>> Johan
>>
>>
>> On Tue, Nov 21, 2023 at 3:39=E2=80=AFAM Antoine Riard <antoine.riard@gma=
il.com> wrote:
>> >
>> > Hi Johan,
>> >
>> > Few comments.
>> >
>> > ## Transaction recycling
>> > The transaction recycling attack is made possible by the change made
>> > to HTLC second level transactions for the anchor channel type[8];
>> > making it possible to add fees to the transaction by adding inputs
>> > without violating the signature. For the legacy channel type this
>> > attack was not possible, as all fees were taken from the HTLC outputs
>> > themselves, and had to be agreed upon by channel counterparties during
>> > signing (of course this has its own problems, which is why we wanted
>> > to change it).
>> >
>> > The attack works on legacy channels if the holder (or local) commitmen=
t transaction confirms first, the second-stage HTLC claim transaction is fu=
lly malleable by the counterparty.
>> >
>> > See https://github.com/lightning/bolts/blob/master/03-transactions.md#=
offered-htlc-outputs (only remote_htlcpubkey required)
>> >
>> > Note a replacement cycling attack works in a future package-relay worl=
d too.
>> >
>> > See test: https://github.com/ariard/bitcoin/commit/19d61fa8cf22a5050b5=
1c4005603f43d72f1efcf
>> >
>> > > The idea of HTLC output aggregation is to collapse all HTLC outputs =
on
>> > > the commitment to a single one. This has many benefits (that I=E2=80=
=99ll get
>> > > to), one of them being the possibility to let the spender claim the
>> > > portion of the output that they=E2=80=99re right to, deciding how mu=
ch should
>> > > go to fees. Note that this requires a covenant to be possible.
>> >
>> > Another advantage of HTLC output aggregation is the reduction of fee-b=
umping reserves requirements on channel counterparties, as second-stage HTL=
C transactions have common fields (nVersion, nLocktime, ...) *could* be sha=
red.
>> >
>> > > ## A single HTLC output
>> > > Today, every forwarded HTLC results in an output that needs to be
>> > > manifested on the commitment transaction in order to claw back money
>> > > in case of an uncooperative channel counterparty. This puts a limit =
on
>> > > the number of active HTLCs (in order for the commitment transaction =
to
>> > > not become too large) which makes it possible to jam the channel wit=
h
>> > > small amounts of capital [1]. It also turns out that having this lim=
it
>> > > be large makes it expensive and complicated to sweep the outputs
>> > > efficiently [2].
>> >
>> > > Instead of having new HTLC outputs manifest for each active
>> > > forwarding, with covenants on the base layer one could create a sing=
le
>> > > aggregated output on the commitment. The output amount being the sum
>> > > of the active HTLCs (offered and received), alternatively one output
>> > > for received and one for offered. When spending this output, you wou=
ld
>> > > only be entitled to the fraction of the amount corresponding to the
>> > > HTLCs you know the preimage for (received), or that has timed out
>> > > (offered).
>> >
>> > > ## Impacts to transaction recycling
>> > > Depending on the capabilities of the covenant available (e.g.
>> > > restricting the number of inputs to the transaction) the transaction
>> > > spending the aggregated HTLC output can be made self sustained: the
>> > > spender will be able to claim what is theirs (preimage or timeout) a=
nd
>> > > send it to whatever output they want, or to fees. The remainder will
>> > > go back into a covenant restricted output with the leftover HTLCs.
>> > > Note that this most likely requires Eltoo in order to not enable fee
>> > > siphoning[7].
>> >
>> > I think one of the weaknesses of this approach is the level of malleab=
ility still left to the counterparty, where one might burn in miners fees a=
ll the HTLC accumulated value promised to the counterparty, and for which t=
he preimages have been revealed off-chain.
>> >
>> > I wonder if a more safe approach, eliminating a lot of competing inter=
ests style of mempool games, wouldn't be to segregate HTLC claims in two se=
parate outputs, with full replication of the HTLC lockscripts in both outpu=
ts, and let a covenant accepts or rejects aggregated claims with satisfying=
 witness and chain state condition for time lock.
>> >
>> > > ## Impacts to slot jamming
>> > > With the aggregated output being a reality, it changes the nature of
>> > > =E2=80=9Cslot jamming=E2=80=9D [1] significantly. While channel capa=
city must still be
>> > > reserved for in-flight HTLCs, one no longer needs to allocate a
>> > > commitment output for each up to some hardcoded limit.
>> >
>> > > In today=E2=80=99s protocol this limit is 483, and I believe most
>> > > implementations default to an even lower limit. This leads to channe=
l
>> > > jamming being quite inexpensive, as one can quickly fill a channel
>> > > with small HTLCs, without needing a significant amount of capital to
>> > > do so.
>> >
>> > > The origins of the 483 slot limits is the worst case commitment size
>> > > before getting into unstandard territory [3]. With an aggregated
>> > > output this would no longer be the case, as adding HTLCs would no
>> > > longer affect commitment size. Instead, the full on-chain footprint =
of
>> > > an HTLC would be deferred until claim time.
>> >
>> > > Does this mean one could lift, or even remove the limit for number o=
f
>> > > active HTLCs? Unfortunately, the obvious approach doesn=E2=80=99t se=
em to get
>> > > rid of the problem entirely, but mitigates it quite a bit.
>> >
>> > Yes, protocol limit of 483 is a long-term limit on the payment through=
put of the LN, though as an upper bound we have the dust limits and mempool=
 fluctuations rendering irrelevant the claim of such aggregated dust output=
s. Aggregated claims might give a more dynamic margin of what is a tangible=
 and trust-minimized HTLC payment.
>> >
>> > > ### Slot jamming attack scenario
>> > > Consider the scenario where an attacker sends a large number of
>> > > non-dust* HTLCs across a channel, and the channel parties enforce no
>> > > limit on the number of active HTLCs.
>> >
>> > > The number of payments would not affect the size of the commitment
>> > > transaction at all, only the size of the witness that must be
>> > > presented when claiming or timing out the HTLCs. This means that the=
re
>> > > is still a point at which chain fees get high enough for the HTLC to
>> > > be uneconomical to claim. This is no different than in today=E2=80=
=99s spec,
>> > > and such HTLCs will just be stranded on-chain until chain fees
>> > > decrease, at which point there is a race between the success and
>> > > timeout spends.
>> >
>> > > There seems to be no way around this; if you want to claim an HTLC
>> > > on-chain, you need to put the preimage on-chain. And when the HTLC
>> > > first reaches you, you have no way of predicting the future chain fe=
e.
>> > > With a large number of uneconomical HTLCs in play, the total BTC
>> > > exposure could still be very large, so you might want to limit this
>> > > somewhat.
>> >
>> > > * Note that as long as the sum of HTLCs exceeds the dust limit, one
>> > > could manifest the output on the transaction.
>> >
>> > Unless we introduce sliding windows during which the claim periods of =
an HTLC can be claimed and freeze accordingly the HTLC-timeout path.
>> >
>> > See: https://fc22.ifca.ai/preproceedings/119.pdf
>> >
>> > Bad news: you will need off-chain consensus on the feerate threshold a=
t which the sliding windows kick-out among all the routing nodes participat=
ing in the HTLC payment path.
>> >
>> > > ## The good news
>> > > With an aggregated HTLC output, the number of HTLCs would no longer
>> > > impact the commitment transaction size while the channel is open and
>> > > operational.
>> >
>> > > The marginal cost of claiming an HTLC with a preimage on-chain would
>> > > be much lower; no new inputs or outputs, only a linear increase in t=
he
>> > > witness size. With a covenant primitive available, the extra footpri=
nt
>> > > of the timeout and success transactions would no longer exist.
>> >
>> > > Claiming timed out HTLCs could still be made close to constant size
>> > > (no preimage to present), so no additional on-chain cost with more
>> > > HTLCs.
>> >
>> > I wonder if in a PTLC world, you can generate an aggregate curve point=
 for all the sub combinations of scalar plausible. Unrevealed curve points =
in a taproot branch are cheap. It might claim an offered HTLC near-constant=
 size too.
>> >
>> > > ## The bad news
>> > > The most obvious problem is that we would need a new covenant
>> > > primitive on L1 (see below). However, I think it could be beneficial
>> > > to start exploring these ideas now in order to guide the L1 effort
>> > > towards something we could utilize to its fullest on L2.
>> >
>> > > As mentioned, even with a functioning covenant, we don=E2=80=99t esc=
ape the
>> > > fact that a preimage needs to go on-chain, pricing out HTLCs at
>> > > certain fee rates. This is analogous to the dust exposure problem
>> > > discussed in [6], and makes some sort of limit still required.
>> >
>> > Ideally such covenant mechanisms would generalize to the withdrawal ph=
ase of payment pools, where dozens or hundreds of participants wish to conf=
irm their non-competing withdrawal transactions concurrently. While unlocki=
ng preimage or scalar can be aggregated in a single witness, there will sti=
ll be a need to verify that each withdrawal output associated with an unloc=
king secret is present in the transaction.
>> >
>> > Maybe few other L2s are answering this N-inputs-to-M-outputs pattern w=
ith advanced locking scripts conditions to satisfy.
>> >
>> > > ### Open question
>> > > With PTLCs, could one create a compact proof showing that you know t=
he
>> > > preimage for m-of-n of the satoshis in the output? (some sort of
>> > > threshold signature).
>> >
>> > > If we could do this we would be able to remove the slot jamming issu=
e
>> > > entirely; any number of active PTLCs would not change the on-chain
>> > > cost of claiming them.
>> >
>> > See comments above, I think there is a plausible scheme here you just =
generate all the point combinations possible, and only reveal the one you n=
eed at broadcast.
>> >
>> > > ## Covenant primitives
>> > > A recursive covenant is needed to achieve this. Something like OP_CT=
V
>> > > and OP_APO seems insufficient, since the number of ways the set of
>> > > HTLCs could be claimed would cause combinatorial blowup in the numbe=
r
>> > > of possible spending transactions.
>> >
>> > > Personally, I=E2=80=99ve found the simple yet powerful properties of
>> > > OP_CHECKCONTRACTVERIFY [4] together with OP_CAT and amount inspectio=
n
>> > > particularly interesting for the use case, but I=E2=80=99m certain m=
any of the
>> > > other proposals could achieve the same thing. More direct inspection
>> > > like you get from a proposal like OP_TX[9] would also most likely ha=
ve
>> > > the building blocks needed.
>> >
>> > As pointed out during the CTV drama and payment pool public discussion=
 years ago, what would be very useful to tie-break among all covenant const=
ructions would be an efficiency simulation framework. Even if the same sema=
ntic can be achieved independently by multiple covenants, they certainly do=
 not have the same performance trade-offs (e.g average and worst-case witne=
ss size).
>> >
>> > I don't think the blind approach of activating many complex covenants =
at the same time is conservative enough in Bitcoin, where one might design =
"malicious" L2 contracts, of which the game-theory is not fully understood.
>> >
>> > See e.g https://blog.bitmex.com/txwithhold-smart-contracts/
>> >
>> > > ### Proof-of-concept
>> > > I=E2=80=99ve implemented a rough demo** of spending an HTLC output t=
hat pays
>> > > to a script with OP_CHECKCONTRACTVERIFY to achieve this [5]. The ide=
a
>> > > is to commit to all active HTLCs in a merkle tree, and have the
>> > > spender provide merkle proofs for the HTLCs to claim, claiming the s=
um
>> > > into a new output. The remainder goes back into a new output with th=
e
>> > > claimed HTLCs removed from the merkle tree.
>> >
>> > > An interesting trick one can do when creating the merkle tree, is
>> > > sorting the HTLCs by expiry. This means that one in the timeout case
>> > > claim a subtree of HTLCs using a single merkle proof (and RBF this
>> > > batched timeout claim as more and more HTLCs expire) reducing the
>> > > timeout case to constant size witness (or rather logarithmic in the
>> > > total number of HTLCs).
>> >
>> > > **Consider it an experiment, as it is missing a lot before it could =
be
>> > > usable in any real commitment setting.
>> >
>> > I think this is an interesting question if more advanced cryptosystems=
 based on assumptions other than the DL problem could constitute a factor o=
f scalability of LN payment throughput by orders of magnitude, by decouplin=
g number of off-chain payments from the growth of the on-chain witness size=
 need to claim them, without lowering in security as with trimmed HTLC due =
to dust limits.
>> >
>> > Best,
>> > Antoine
>> >
>> > Le jeu. 26 oct. 2023 =C3=A0 20:28, Johan Tor=C3=A5s Halseth via bitcoi=
n-dev <bitcoin-dev@lists.linuxfoundation.org> a =C3=A9crit :
>> >>
>> >> Hi all,
>> >>
>> >> After the transaction recycling has spurred some discussion the last
>> >> week or so, I figured it could be worth sharing some research I=E2=80=
=99ve
>> >> done into HTLC output aggregation, as it could be relevant for how to
>> >> avoid this problem in a future channel type.
>> >>
>> >> TLDR; With the right covenant we can create HTLC outputs that are muc=
h
>> >> more chain efficient, not prone to tx recycling and harder to jam.
>> >>
>> >> ## Transaction recycling
>> >> The transaction recycling attack is made possible by the change made
>> >> to HTLC second level transactions for the anchor channel type[8];
>> >> making it possible to add fees to the transaction by adding inputs
>> >> without violating the signature. For the legacy channel type this
>> >> attack was not possible, as all fees were taken from the HTLC outputs
>> >> themselves, and had to be agreed upon by channel counterparties durin=
g
>> >> signing (of course this has its own problems, which is why we wanted
>> >> to change it).
>> >>
>> >> The idea of HTLC output aggregation is to collapse all HTLC outputs o=
n
>> >> the commitment to a single one. This has many benefits (that I=E2=80=
=99ll get
>> >> to), one of them being the possibility to let the spender claim the
>> >> portion of the output that they=E2=80=99re right to, deciding how muc=
h should
>> >> go to fees. Note that this requires a covenant to be possible.
>> >>
>> >> ## A single HTLC output
>> >> Today, every forwarded HTLC results in an output that needs to be
>> >> manifested on the commitment transaction in order to claw back money
>> >> in case of an uncooperative channel counterparty. This puts a limit o=
n
>> >> the number of active HTLCs (in order for the commitment transaction t=
o
>> >> not become too large) which makes it possible to jam the channel with
>> >> small amounts of capital [1]. It also turns out that having this limi=
t
>> >> be large makes it expensive and complicated to sweep the outputs
>> >> efficiently [2].
>> >>
>> >> Instead of having new HTLC outputs manifest for each active
>> >> forwarding, with covenants on the base layer one could create a singl=
e
>> >> aggregated output on the commitment. The output amount being the sum
>> >> of the active HTLCs (offered and received), alternatively one output
>> >> for received and one for offered. When spending this output, you woul=
d
>> >> only be entitled to the fraction of the amount corresponding to the
>> >> HTLCs you know the preimage for (received), or that has timed out
>> >> (offered).
>> >>
>> >> ## Impacts to transaction recycling
>> >> Depending on the capabilities of the covenant available (e.g.
>> >> restricting the number of inputs to the transaction) the transaction
>> >> spending the aggregated HTLC output can be made self sustained: the
>> >> spender will be able to claim what is theirs (preimage or timeout) an=
d
>> >> send it to whatever output they want, or to fees. The remainder will
>> >> go back into a covenant restricted output with the leftover HTLCs.
>> >> Note that this most likely requires Eltoo in order to not enable fee
>> >> siphoning[7].
>> >>
>> >> ## Impacts to slot jamming
>> >> With the aggregated output being a reality, it changes the nature of
>> >> =E2=80=9Cslot jamming=E2=80=9D [1] significantly. While channel capac=
ity must still be
>> >> reserved for in-flight HTLCs, one no longer needs to allocate a
>> >> commitment output for each up to some hardcoded limit.
>> >>
>> >> In today=E2=80=99s protocol this limit is 483, and I believe most
>> >> implementations default to an even lower limit. This leads to channel
>> >> jamming being quite inexpensive, as one can quickly fill a channel
>> >> with small HTLCs, without needing a significant amount of capital to
>> >> do so.
>> >>
>> >> The origins of the 483 slot limits is the worst case commitment size
>> >> before getting into unstandard territory [3]. With an aggregated
>> >> output this would no longer be the case, as adding HTLCs would no
>> >> longer affect commitment size. Instead, the full on-chain footprint o=
f
>> >> an HTLC would be deferred until claim time.
>> >>
>> >> Does this mean one could lift, or even remove the limit for number of
>> >> active HTLCs? Unfortunately, the obvious approach doesn=E2=80=99t see=
m to get
>> >> rid of the problem entirely, but mitigates it quite a bit.
>> >>
>> >> ### Slot jamming attack scenario
>> >> Consider the scenario where an attacker sends a large number of
>> >> non-dust* HTLCs across a channel, and the channel parties enforce no
>> >> limit on the number of active HTLCs.
>> >>
>> >> The number of payments would not affect the size of the commitment
>> >> transaction at all, only the size of the witness that must be
>> >> presented when claiming or timing out the HTLCs. This means that ther=
e
>> >> is still a point at which chain fees get high enough for the HTLC to
>> >> be uneconomical to claim. This is no different than in today=E2=80=99=
s spec,
>> >> and such HTLCs will just be stranded on-chain until chain fees
>> >> decrease, at which point there is a race between the success and
>> >> timeout spends.
>> >>
>> >> There seems to be no way around this; if you want to claim an HTLC
>> >> on-chain, you need to put the preimage on-chain. And when the HTLC
>> >> first reaches you, you have no way of predicting the future chain fee=
.
>> >> With a large number of uneconomical HTLCs in play, the total BTC
>> >> exposure could still be very large, so you might want to limit this
>> >> somewhat.
>> >>
>> >> * Note that as long as the sum of HTLCs exceeds the dust limit, one
>> >> could manifest the output on the transaction.
>> >>
>> >> ## The good news
>> >> With an aggregated HTLC output, the number of HTLCs would no longer
>> >> impact the commitment transaction size while the channel is open and
>> >> operational.
>> >>
>> >> The marginal cost of claiming an HTLC with a preimage on-chain would
>> >> be much lower; no new inputs or outputs, only a linear increase in th=
e
>> >> witness size. With a covenant primitive available, the extra footprin=
t
>> >> of the timeout and success transactions would no longer exist.
>> >>
>> >> Claiming timed out HTLCs could still be made close to constant size
>> >> (no preimage to present), so no additional on-chain cost with more
>> >> HTLCs.
>> >>
>> >> ## The bad news
>> >> The most obvious problem is that we would need a new covenant
>> >> primitive on L1 (see below). However, I think it could be beneficial
>> >> to start exploring these ideas now in order to guide the L1 effort
>> >> towards something we could utilize to its fullest on L2.
>> >>
>> >> As mentioned, even with a functioning covenant, we don=E2=80=99t esca=
pe the
>> >> fact that a preimage needs to go on-chain, pricing out HTLCs at
>> >> certain fee rates. This is analogous to the dust exposure problem
>> >> discussed in [6], and makes some sort of limit still required.
>> >>
>> >> ### Open question
>> >> With PTLCs, could one create a compact proof showing that you know th=
e
>> >> preimage for m-of-n of the satoshis in the output? (some sort of
>> >> threshold signature).
>> >>
>> >> If we could do this we would be able to remove the slot jamming issue
>> >> entirely; any number of active PTLCs would not change the on-chain
>> >> cost of claiming them.
>> >>
>> >> ## Covenant primitives
>> >> A recursive covenant is needed to achieve this. Something like OP_CTV
>> >> and OP_APO seems insufficient, since the number of ways the set of
>> >> HTLCs could be claimed would cause combinatorial blowup in the number
>> >> of possible spending transactions.
>> >>
>> >> Personally, I=E2=80=99ve found the simple yet powerful properties of
>> >> OP_CHECKCONTRACTVERIFY [4] together with OP_CAT and amount inspection
>> >> particularly interesting for the use case, but I=E2=80=99m certain ma=
ny of the
>> >> other proposals could achieve the same thing. More direct inspection
>> >> like you get from a proposal like OP_TX[9] would also most likely hav=
e
>> >> the building blocks needed.
>> >>
>> >> ### Proof-of-concept
>> >> I=E2=80=99ve implemented a rough demo** of spending an HTLC output th=
at pays
>> >> to a script with OP_CHECKCONTRACTVERIFY to achieve this [5]. The idea
>> >> is to commit to all active HTLCs in a merkle tree, and have the
>> >> spender provide merkle proofs for the HTLCs to claim, claiming the su=
m
>> >> into a new output. The remainder goes back into a new output with the
>> >> claimed HTLCs removed from the merkle tree.
>> >>
>> >> An interesting trick one can do when creating the merkle tree, is
>> >> sorting the HTLCs by expiry. This means that one in the timeout case
>> >> claim a subtree of HTLCs using a single merkle proof (and RBF this
>> >> batched timeout claim as more and more HTLCs expire) reducing the
>> >> timeout case to constant size witness (or rather logarithmic in the
>> >> total number of HTLCs).
>> >>
>> >> **Consider it an experiment, as it is missing a lot before it could b=
e
>> >> usable in any real commitment setting.
>> >>
>> >>
>> >> [1] https://bitcoinops.org/en/topics/channel-jamming-attacks/#htlc-ja=
mming-attack
>> >> [2] https://github.com/lightning/bolts/issues/845
>> >> [3] https://github.com/lightning/bolts/blob/aad959a297ff66946effb1655=
18143be15777dd6/02-peer-protocol.md#rationale-7
>> >> [4] https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2022-Nove=
mber/021182.html
>> >> [5] https://github.com/halseth/tapsim/blob/b07f29804cf32dce0168ab5bb4=
0558cbb18f2e76/examples/matt/claimpool/script.txt
>> >> [6] https://lists.linuxfoundation.org/pipermail/lightning-dev/2021-Oc=
tober/003257.html
>> >> [7] https://github.com/lightning/bolts/issues/845#issuecomment-937736=
734
>> >> [8] https://github.com/lightning/bolts/blob/8a64c6a1cef979b3f0cecb00b=
a7a48c2d28b3588/03-transactions.md?plain=3D1#L333
>> >> [9] https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2022-May/=
020450.html
>> >> _______________________________________________
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