grin/doc/translations/mimblewimble.md

    https://scalingbitcoin.org/papers/mimblewimble.txt

    MIMBLEWIMBLE
    Tom Elvis Jedusor
    19 July, 2016

    \****/
    Introduction
    /****\

    Bitcoin is the first widely used financial system for which all the necessary
    data to validate the system status can be cryptographically verified by anyone.
    However, it accomplishes this feat by storing all transactions in a public
    database called "the blockchain" and someone who genuinely wishes to check
    this state must download the whole thing and basically replay each transaction,
    check each one as they go. Meanwhile, most of these transactions have not
    affected the actual final state (they create outputs that are destroyed
    a transaction later).

    At the time of this writing, there were nearly 150 million transactions
    committed in the blockchain, which must be replayed to produce a set of
    only 4 million unspent outputs.

    It would be better if an auditor needed only to check data on the outputs
    themselves, but this is impossible because they are valid if and only if the
    output is at the end of a chain of previous outputs, each signs the next. In
    other words, the whole blockchain must be validated to confirm the final
    state.


    Add to this that these transactions are cryptographically atomic, it is clear
    what outputs go into every transaction and what emerges. The "transaction graph"
    resulting reveals a lot of information and is subjected to analysis by many
    companies whose business model is to monitor and control the lower classes.
    This makes it very non-private and even dangerous for people to use.


    Some solutions to this have been proposed. Greg Maxwell discovered to encrypt
    the amounts, so that the graph of the transaction is faceless but still allow
    validation that the sums are correct [1]. Dr Maxwell also produced CoinJoin,
    a system for Bitcoin users to combine interactively transactions, confusing
    the transaction graph. Nicolas van Saberhagen has developed a system to blind
    the transaction entries, goes much further to cloud the transaction graph (as
    well as not needed the user interaction) [3]. Later, Shen Noether combined
    the two approaches to obtain "confidential transactions" of Maxwell AND the
    darkening of van Saberhagen [4].

    These solutions are very good and would make Bitcoin very safe to use. But
    the problem of too much data is made even worse. Confidential transactions
    require multi-kilobyte proofs on every output, and van Saberhagen signatures
    require every output to be stored for ever, since it is not possible to tell
    when they are truly spent.

    Dr. Maxwell's CoinJoin has the problem of needing interactivity. Dr. Yuan Horas
    Mouton fixed this by making transactions freely mergeable [5], but he needed to
    use pairing-based cryptography, which is potentially slower and more difficult
    to trust. He called this "one-way aggregate signatures" (OWAS).

    OWAS had the good idea to combine the transactions in blocks. Imagine that we
    can combine across blocks (perhaps with some glue data) so that when the outputs
    are created and destroyed, it is the same as if they never existed. Then, to
    validate the entire chain, users only need to know when money is entered into
    the system (new money in each block as in Bitcoin or Monero or peg-ins for
    sidechains [6]) and final unspent outputs, the rest can be removed and forgotten.
    Then we can have Confidential Transactions to hide the amounts and OWAS to blur
    the transaction graph, and use LESS space than Bitcoin to allow users to fully
    verify the blockchain. And also imagine that we must not pairing-based cryptography
    or new hypotheses, just regular discrete logarithms signatures like Bitcoin.
    Here is what I propose.

    I call my creation Mimblewimble because it is used to prevent the blockchain from
    talking about all user's information [7].


    \****/
    Confidential Transactions and OWAS
    /****\

    The first thing we need to do is remove Bitcoin Script. This is sad, but it is too
    powerful so it is impossible to merge transactions using general scripts. We will
    demonstrate that confidential transactions of Dr. Maxwell are enough (after some
    small modification) to authorize spending of outputs and also allows to make
    combined transactions without interaction. This is in fact identical to OWAS,
    and allows relaying nodes take some transaction fee or the recipient to change
    the transaction fees. These additional things Bitcoin can not do, we get for free.

    We start by reminding the reader how confidential transactions work. First, the
    amounts are coded by the following equation:

        C = r*G + v*H

    where C is a Pedersen commitment, G and H are fixed nothing-up-my-sleeve elliptic
    curve group generators, v is the amount, and r is a secret random blinding key.

    Attached to this output is a rangeproof which proves that v is in [0, 2^64], so
    that user cannot exploit the blinding to produce overflow attacks, etc.

    To validate a transaction, the verifer will add commitments for all outputs, plus
    f*H (f here is the transaction fee which is given explicitly) and subtracts all
    input commitments. The result must be 0, which proves that no amount was created
    or destroyed overall.

    We note that to create such a transaction, the user must know the sum of all the
    values of r for commitments entries. Therefore, the r-values (and their sums) act
    as secret keys. If we can make the r output values known only to the recipient,
    then we have an authentication system! Unfortunately, if we keep the rule that
    commits all add to 0, this is impossible, because the sender knows the sum of
    all _his_ r values, and therefore knows the receipient's r values sum to the
    negative of that. So instead, we allow the transaction to sum to a nonzero value
    k*G, and require a signature of an empty string with this as key, to prove its
    amount component is zero.

    We let transactions have as many k*G values as they want, each with a signature,
    and sum them during verification.

    To create transactions sender and recipient do following ritual:

      1. Sender and recipient agree on amount to be sent. Call this b.

      2. Sender creates transaction with all inputs and change output(s), and gives
         recipient the total blinding factor (r-value of change minus r-values of
         inputs) along with this transaction. So the commitments sum to r*G - b*H.

      3. Recipient chooses random r-values for his outputs, and values that sum
         to b minus fee, and adds these to transaction (including range proof).
         Now the commitments sum to k*G - fee*H for some k that only recipient
         knows.

      4. Recipient attaches signature with k to the transaction, and the explicit
         fee. It has done.

    Now, creating transactions in this manner supports OWAS already. To show this,
    suppose we have two transactions that have a surplus k1*G and k2*G, and the
    attached signatures with these. Then you can combine the lists of inputs and
    outputs of the two transactions, with both k1*G and k2*G to the mix, and
    voilá! is again a valid transaction. From the combination, it is impossible to
    say which outputs or inputs are from which original transaction.

    Because of this, we change our block format from Bitcoin to this information:
     1. Explicit amounts for new money (block subsidy or sidechain peg-ins) with
         whatever else data this needs. For a sidechain peg-in maybe it references
         a Bitcoin transaction that commits to a specific excess k*G value?

      2. Inputs of all transactions

      3. Outputs of all transactions

      4. Excess k*G values for all transactions

    Each of these are grouped together because it do not matter what the transaction
    boundaries are originally. In addition, Lists 2 3 and 4 should be required to be
    coded in alphabetical order, since it is quick to check and prevents the block
    creator of leaking any information about the original transactions.

    Note that the outputs are now identified by their hash, and not by their position
    in a transaction that could easily change. Therefore, it should be banned to have
    two unspent outputs are equal at the same time, to avoid confusion.



    \****/
    Merging Transactions Across Blocks
    /****\

    Now, we have used Dr. Maxwell's Confidential Transactions to create a noninteractive
    version of Dr. Maxwell's CoinJoin, but we have not seen the last of marvelous Dr. Maxwell!
    We need another idea, transaction cut-through, he described in [8]. Again, we create a
    noninteractive version of this, and to show how it is used with several blocks.

    We can imagine now each block as one large transaction. To validate it, we add all the
    output commitments together, then subtracts all input commitments, k*G values, and all
    explicit input amounts times H. We find that we could combine transactions from two
    blocks, as we combined transactions to form a single block, and the result is again
    a valid transaction. Except now, some output commitments have an input commitment exactly
    equal to it, where the first block's output was spent in the second block. We could
    remove both commitments and still have a valid transaction. In fact, there is not even
    need to check the rangeproof of the deleted output.

    The extension of this idea all the way from the genesis block to the latest block, we
    see that EVERY nonexplicit input is deleted along with its referenced output. What
    remains are only the unspent outputs, explicit input amounts and every k*G value.
    And this whole mess can be validated as if it were one transaction: add all unspent
    commitments output, subtract the values k*G, validate explicit input amounts (if there
    is anything to validate) then subtract them times H. If the sum is 0, the entire
    chain is good.

    What is this mean? When a user starts up and downloads the chain he needs the following
    data from each block:

      1. Explicit amounts for new money (block subsidy or sidechain peg-ins) with
         whatever else data this needs.

      2. Unspent outputs of all transactions, along with a merkle proof that each
         output appeared in the original block.

      3. Excess k*G values for all transactions.

    Bitcoin today there are about 423000 blocks, totaling 80GB or so of data on the hard
    drive to validate everything. These data are about 150 million transactions and 5 million
    unspent nonconfidential outputs. Estimate how much space the number of transactions
    take on a Mimblewimble chain. Each unspent output is around 3Kb for rangeproof and
    Merkle proof. Each transaction also adds about 100 bytes: a k*G value and a signature.
    The block headers and explicit amounts are negligible. Add this together and get
    30Gb -- with a confidential transaction and obscured transaction graph!


    \****/
    Questions and Intuition
    /****\

    Here are some questions that since these weeks, dreams asked me and I woke up sweating.
    But in fact it is OK.

      Q. If you delete the transaction outputs, user cannot verify the rangeproof and maybe
         a negative amount is created.

      A. This is OK. For the entire transaction to validate all negative amounts must have
         been destroyed. User have SPV security only that no illegal inflation happened in
         the past, but the user knows that _at this time_ no inflation occurred.


      Q. If you delete the inputs, double spending can happen.

      A. In fact, this means: maybe someone claims that some unspent output was spent
         in the old days. But this is impossible, otherwise the sum of the combined transaction
         could not be zero.

         An exception is that if the outputs are amount zero, it is possible to make two that
         are negatives of each other, and the pair can be revived without anything breaks. So to
         prevent consensus problems, outputs 0-amount should be banned. Just add H at each output,
         now they all amount to at least 1.



    \****/
    Future Research
    /****\

    Here are some questions I can not answer at the time of this writing.

    1. What script support is possible? We would need to translate script operations into
       some sort of discrete logarithm information.

    2. We require user to check all k*G values, when in fact all that is needed is that their
       sum is of the form k*G. Instead of using signatures is there another proof of discrete
       logarithm that could be combined?

    3. There is a denial-of-service option when a user downloads the chain, the peer can give
       gigabytes of data and list the wrong unspent outputs. The user will see that the result
       do not add up to 0, but cannot tell where the problem is.

       For now maybe the user should just download the blockchain from a Torrent or something
       where the data is shared between many users and is reasonably likely to be correct.


    [1] https://people.xiph.org/~greg/confidential_values.txt
    [2] https://bitcointalk.org/index.php?topic=279249.0
    [3] https://cryptonote.org/whitepaper.pdf
    [4] https://eprint.iacr.org/2015/1098.pdf
    [5] https://download.wpsoftware.net/bitcoin/wizardry/horasyuanmouton-owas.pdf
    [6] http://blockstream.com/sidechains.pdf
    [7] http://fr.harrypotter.wikia.com/wiki/Sortilège_de_Langue_de_Plomb
    [8] https://bitcointalk.org/index.php?topic=281848.0