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Wednesday, May 19th 2021 - Issue #995

BIP 118 discussion heats up

The strive to make Bitcoin as resilient and useful as possible never stops. We've been talking a lot about the ongoing efforts to get Taproot activated and live on the network over the last year. As that activation process progresses, it seems that the drum is beginning to beat for another upgrade to the network that would enable some really cool use cases for off-chain protocols like the Lightning Network while enabling new layer two solutions to be unlocked; particularly, spacechains.

All of this may sound like gibberish to any of you freaks who may be new to this rag, or Bitcoin overall. At the end of the day, the activation of SIGHASH_ANYPREVOUT as described in BIP-118 would improve the Lightning Network by making channel management significantly easier and more robust. Things like lightweight Watchtowers - which ensure node operators aren't acting nefariously against their channel counterparts, and channel factories - which enable multiple people to participate in the opening of a channel, would be made possible. Increasing security and scalability of the second layer solution.

On top of this, anyprevout would also create the conditions that would make spacechains possible by making it possible to create more complex covenants. Spacechains enable blind merge-mined sidechains that do not have a two-way peg mechanism like Liquid or native tokens. This would allow for the creation of robust smart contracting outside of the protocol layer. Allowing users to create very elaborate contracts that do not burden the protocol layer with data bloat. Even better, these one-way peg blind merge-mined sidechains would be contributing to the security budget of the Bitcoin network because users would have to pay fees to create their pegs.

This would not be the only benefit of more complex covenants, they would also enable more secure vaults, which allow users to secure their bitcoin with very strict spending conditions.

All in all, these improvements sound incredible on paper. However, there is much to do in terms of discussion around the tradeoffs that come with anyprevout and actually writing the code that would make it possible in the first place. As we try to do with all of these potential Bitcoin improvements, we will keep you freaks abreast of the situation as it progresses. Onward!   
Final thought...

Morning runs > afternoon runs.
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