Proof of Work: A Bitcoin covenant proposal

Quick Take

  • In a BIP draft, Jeremy Rubin proposes a constrained and minimal type of covenant be added to Bitcoin
  • Covenants are essentially a type of restriction on where a given set of coins can be spent
  • They would enable bitcoin “vaults” for enhanced security, but have the downside of potentially enabling someone to mint BTC that can only ever be spent to specific addresses

The following newsletter is republished with permission from Eric Meltzer of Primitive Ventures, a global venture investment firm with a focus on blockchain and related technologies. You can follow Eric on Twitter at @wheatpond and subscribe here to Proof of Work

Today I’d like to highlight an interesting contribution from friend-of-PoW Jeremy Rubin, both as a cool thing in and of itself, and as an example of how Bitcoin development works. Bitcoin’s slow adoption of new features is often misunderstood as Bitcoin development itself being stalled, when actually it's very active, but just unusually conservative in service of keeping Bitcoin chain security as high as possible.

In this BIP draft, Jeremy proposes a constrained and minimal type of covenant be added to Bitcoin. Covenants are essentially a type of restriction on where a given set of coins can be spent. They’re a very useful smart-contract primitive, which would enable things like “vaults” which could protect your Bitcoin from being easily spent by someone who got your private key (details in the linked paper), but have the downside of potentially enabling someone to mint BTC that can only ever be spent to specific addresses. There was some worry that this might enable e.g. a nation state to demand that all BTC held by its citizens enter into covenants that only allowed it to be spent among pre-approved addresses, for example.

Jeremy’s version of covenants are wrapped with a multisig-based key which can pre-empt/nullify the covenant. Further, they don’t allow arbitrary ouputs to be added—all outputs must be specified at construction, which means these covenants can only be used to expand to a finite number of steps, which alleviates a lot of the fungibility worries. Finally, in this proposal, “covenants are restricted to be spendable as a single input only, preventing the 'half spend' problem.”

These limited covenants get us some pretty neat things, though. First, you can use them to essentially commit a bunch of future payments in a single transaction during a time when fees are especially high, and then expand the payments (confirming them on chain) either in one or multiple tiered steps, when fees are lower. Similarly you can use them to instantiate a bunch of channels instead of payments, which allows instant liquidity for the coins involved. These covenants can also be used to create a construction very similar to the “vaults” in the initial covenants paper, and also have some benefits for implementing trustless CoinJoin, a privacy preserving aggregation technique.

Whether or not Jeremy’s BIP will make it into Bitcoin is unclear at this point—the proposal is very new and will definitely receive a lot of feedback and tweaks. However, it’s a great example of how you can add interesting features to Bitcoin while avoiding compromise of BTC’s core value proposition—a trustless store of value with high on-chain security. I’ll track this BIP as it makes its way through the approval process and provide commentary in future newsletters.

In another interesting development, Veil (a prediction market interface initially built to execute onto Augur) has forked the Augur codebase and removed the decentralized oracle part (enabling market creators to choose an oracle, including the Augur oracle itself, or a centralized one instead) and thereby have also removed REP. This (ETH projects forking out somewhat unnecessary ERC20 tokens) is something I expected to see sooner, and I’m very curious to watch it develop with Veil. A skeptic would say that this move is likely to end up with a lot of people using centralized oracles, essentially obviating the need for a blockchain at all—an optimist would say that other decentralized oracles without tokens will become available, and there will be increased liquidity as a result of removing the REP requirement. Watch this space!

Thanks as always for reading—more next week!

Bitcoin & Friends

Jimmy and Optech on Bitcoin

  • Proposed anyprevout sighash modes: two weeks ago, Anthony Towns posted a proposed BIP to the Bitcoin-Dev and Lightning-Dev mailing lists for consideration.

  • talk by Andrew Poelstra about the cryptography used in cryptocurrencies.

  • panel by Rodolfo Novak, Elaine Ou, Adam Back, and Richard Myers about using Bitcoin without direct access to the Internet.

  • panel by Will O’Beirne, Lisa Neigut, Alex Bosworth with moderation by Leigh Cuen discussing the future of LN, mostly the short-term and medium-term conclusion of current development efforts surrounding the LN 1.1 specification.

Tony from Kadena

Kadena is building Pact, a formally verifiable smart-contracting language for financial applications, and Chainweb, a PoW blockchain that uses multiple chains in parallel to increase throughput.

Aviv from Spacemesh

Spacemesh is a programmable cryptocurrency powered by a novel proof-of-space-time consensus protocol.

JZ from Decred

Decred is an autonomous digital currency with a hybrid consensus system. It is built to be a self-ruling currency where everyone can vote on the rules and project-level decision making proportionately to their stake.

  • Marco was showing off dcrd and dcrwallet running on RISC-V after getting the Go tooling working. Considering all the x86 CPU exploits popping up lately many of us are very excited about the prospect of being able to run Decred on open hardware.

  • Jake gave a talk at Consensus providing an overview and update on the project. Brady Dale of Coindesk live-tweeted it for those who were unable to attend the festivities in New York.

  • Raedah Group has released a new beta for the Decred wallet for iOS, and it's available on TestFlight for anybody that wants to give it a spin. Feel free to file any issues on GitHub if you run into them.

Johnny from Stellar

Stellar is an open network for sending and exchanging value of any kind. Its global network enables digitization of assets - from carbon credits to currencies - and enables movement around the internet with ease.

Privacy coins

Paige & Zooko from Zcash

Zcash is a digital currency utilizing zk-SNARKs to enable its privacy-protecting properties.

Mitchell from Monero

Monero is an open-source, privacy-focused cryptocurrency using the ASIC-resistant CryptoNote PoW algorithm. It enforces all privacy features at the protocol level to ensure that all transactions create a single fungible anonymity pool.

  • The new RandomX PoW algorithm is ready for you to test, and we're planning audits.

  • Continuing to find ways to compress linkable spontaneously anonymous group (LSAG) signatures.

Daniel from Grin

Grin is a community-driven implementation of the Mimblewimble protocol that aims to be privacy preserving, scalable, fair, and minimal.

Beni from Beam

Beam is a confidential and scalable cryptocurrency based on Mimblewimble.

  • Quite a busy week for Team Beam with the following releases:

    • Bright Boson 2.1.4910 - with some cool privacy-oriented new features and improvements

    • Bright Boson 2.1.0 Android - adding here the following features: proof of payment, privacy mode to hide amounts, fingerprint recognition and many more…

    • Bright Boson 2.2.17 iOS - third release for our iOS wallet with some super cool new features i.e.: QR code that can include the amount of Beams and the UTXO info that can be hidden in the privacy mode

  • Meet Beam’s CEO Alexander Zaidelson in Moscow at the Russian Blockchain Week, May the 22nd, 2019

Smart contracting platforms

Evan from Ethereum

Ethereum is a decentralized platform for applications that aims to resist fraud, censorship or third-party interference.

Erik from NEAR

NEAR is a sharded proof-of-stake blockchain.

  • 22 total PRs merged or proposed across three repos with 4 authors: nearcore, nearlib and near-wallet

  • NEAR hosted and/or participated in several events for consensus week in NYC. Here are the recorded live streams (youtube versions available next week):

  • The first NEARathon has concluded. Judging and winners announcement here

  • Application/Dev Layer

    • Implemented economics that deducts fees directly from the balance instead of using gas/mana

    • Implemented RLP in assemblyscript.

    • Added testing to near-runtime-ts.

    • Wallet

      • Completed phone verification UI

      • Integrated phone verification with blockchain

      • Integrated app-specific access keys into the wallet

      • Introduced common request error handling components

    • Nearlib

      • Make continuous integration tests work with shared TestNet

AJ from Tezos

Tezos is a self-amending blockchain that features formally verified smart contracts, on-chain governance, and a proof-of-stake consensus algorithm which enables all token holders to participate in the network. 

  • Coinbase CEO, Brian Armstrong, gives an update on the performance of Coinbase Custody’s Tezos staking infrastructure

  • Tezo Asia 2019 - The Future Frontier of Blockchain Technology has been announced. This all day conference will be hosted by Tezos Southeast Asia and Tocqueville Group on June 7th.

  • Tezos Commons hosted it’s first Tezos Meetup in India, Bangalore with over 80 participants attending to learn more about Tezos and the ecosystem.

  • Tezos first proposal update: The first amendment proposed for Tezos will reach a Quorum of 81.39% this week with the majority voting “yay.” Subsequently, the Tezos protocol will activate the new protocol automatically, signalling the first protocol upgrade in Tezos history from coordination amongst the broad Tezos community.

Topper from Quorum Control

Quorum Control makes Tupelo, a permissionless proof of stake DLT platform purpose-built to model individual objects that enables flexible public or private data models.

Myles from EOS

EOS is a new blockchain architecture designed to enable vertical and horizontal scaling of decentralized applications.

  • EOS savings fund (eosio.saving contract) was burned

  • EOS New York put forth a proposal to reward and incentivize voters on EOS

  • Dan Larimer published a new proposal for a highly liquid stablecoin 

  • dGoods (EOS-native NFT standard) v1.0 released

  • Everipedia published their EOS UTXO protocol

  •'s June 1st event will be live-streamed 

  • We debuted our new bi-weekly EOS Update newsletter (subscribe for more in-depth updates)

Zaki from Cosmos

The Cosmos Network is a decentralized network of independent, scalable, and interoperable blockchains.

  • The Cosmos Hub reference implementation was split into it's own repo from the Cosmos SDK. Meet Gaia.

  • PolychainLabs release Tenderseed, a stateless P2P seed node for Tendermint chains.

  • We announced our Seoul Hackathon.

  • Poloniex announced the intention to support Cosmos staking.

Kate and Dean from Agoric

Founded by pioneers in secure development and distributed systems, Agoric uses a secure subset of JavaScript to enable object capabilities and smart contracts.

  • Our team grew! We’d like to welcome four new hires: Michael Fig, Chris Hibbert, Tatyana Roberts, and Paul Walton. They will be contributing in engineering, operations, and business development.

  • We’ve been hard at work on our testnet, building on our “SwingSet” environment.

Financial Infrastructure

Antonio from dYdX

dYdX is a decentralized exchange for margin trading, borrowing, lending, and eventually derivatives. dYdX allows traders to trustlessly short and get leverage on crypto assets.

Coulter from MakerDAO

Maker is comprised of a decentralized stablecoin, collateral loans, and community governance.

  • Latin America Community Lead Mariano DiPietra discussing Dai helping the economy in places like Venezuela

  • Business Development Associate Jennifer Senhaji on stage discussing our 165+ Dai integrations

  • Nik Kunkel, Head of Backend Services, on a panel for decentralized stablecoins

  • Maker COO Steven Becker helped wrap up Consensus 2019 by chatting DeFi on stage with Placeholder VC's Chris Burniske

  • Watch Head of Business Development Greg DiPrisco explain how Dai will go beyond banks

Lazar from MARKET Protocol

MARKET Protocol is a framework for creating tokens that track prices of traditional or digital assets.

  • Continued progress with our security audit prior to MARKET Protocol mainnet release

  • Added trade order validation flow to MPX UI and checks

  • Implemented new email verification and onboarding screens

  • Migrated from Redis to Postgres database

  • Implemented needed functionality for user notification system

Robert from Compound

Compound is a money market protocol on the Ethereum blockchain — allowing individuals, institutions, and applications to frictionlessly earn interest on or borrow cryptographic assets without having to negotiate with a counterparty or peer.

  • Continued alpha-testing Compound v2

Layer two and interoperability

Paul from Veil

Veil is a peer-to-peer prediction market and derivatives platform built on top of Augur, 0x, and Ethereum.

  • Launched markets on the 2020 US Democratic nomination denominated in Dai. Trade here.

  • Deployed a custom version of Augur called AugurLite to support Dai markets.

  • Published a blog post with details about AugurLite and how we use it.

Tony from Liquidity.Network

Liquidity Network is a transfer and swap platform for any token

  • LQD can now be traded on Uniswap.

  • New bounty on Gitcoin! Developers wanting to start with Liquidity can create a Liquidity Burner, a fork of the awesome Burner wallet!

  • Liquidity Canvas competition is back, full details can be found here. 

Dong Mo from Celer

Celer Network is a layer-2 scaling platform that enables fast, easy and secure off-chain transactions for not only payment transactions, but also generalized off-chain smart contracts.

  • We've finished fully decentralized turn-based game and wallet import flow with off-chain state syncing. 

  • We released Alpha Mainnet version. 

  • Operational readiness for ETHNewYork users. 

  • System improvements, bug fixing, and monitoring scripts. 

  • Continue R&D design & planning for end-of-June milestone.

Alexandra from Parity Technologies

Parity Technologies builds core blockchain infrastructure, from Parity Ethereum, an Ethereum client, to Polkadot, an interoperable blockchain network.

Application infrastructure

Doug from Livepeer

Livepeer is a decentralized video infrastructure network, dramatically reducing prices for developers and businesses building video streaming applications at scale. 

David from Sia

Sia is a decentralized cloud storage platform leveraging blockchain technology to create a data storage marketplace that is more robust and more affordable than traditional cloud storage providers.

  • Multiple bug fixes were implemented this week, including some related to the recovery of contracts from backups, redundancy of files and the host-renter negotiation of contracts.

  • The team is finishing some blocking elements necessary for the 1.4.1 release.

  • ChrisSchinnerl started working on Partial Uploads, which will be featured on version 1.4.2. This will allow renters to just upload the changes of a file, instead of the whole file, after each file modification, representing considerable savings for the renter on files frequently updated.

  • Two new S3-compatible API projects, both built on Sia, have launched today. Filebase and Goobox both allow you to easily store files backed by the decentralized cloud. No messing with crypto, no waiting for a blockchain to sync.

  • Community member @Rezant released an online troubleshooting tool for hosts on SiaCentral that attempts to connect to the host and verifies its correct configuration:

  • Swing by our Discord to keep up with all the latest:


Sam from OpenBazaar

OpenBazaar is an open source project developing a protocol for e-commerce transactions in a fully decentralized marketplace.

  • Ethereum precision work continues on server and client side in order to integrate ETH for the upcoming 2.4 release.

  • Lots of behind the scenes work - both development and logistics - to get prepped for the Haven beta launch.

China & Asia Updates

Mining ?

  • WhatsMiner announced its new flagship miner M20 in Hangzhou, with a foundry service from Samsung

  • Recent BitMain hash rate disclosure shows that its SHA256 hashrate is down almost 90% from last month ... ? it is unlikely due to massive farm shut-downs since mining is super profitable now, so most likely a spin-out of its mining business or some other kind of hashrate re-allocation

  • Another notable personnel update of Bitmain is that its Chief Economist Chuanwei Zhou, recently quit Bitmain to join WxBlockchain. Before Bitmian, Zhou was a researcher at the People’s Bank of China  

Trading/Exchanges ?

  • There is an unconfirmed rumor about HitBTC exit scamming, as many have been experiencing withdrawal issues for more than a month

  • Former BCH team is now working with Coinex on its own public chain, Coinex Chain. Note that Coinex is founded by the former founder of one of the largest BTC mining pools, ViaBTC, who is also a close friend of Jihan


  • Samsung is going big into both ASIC foundry services for mining and end user blockchain application with its Galaxy 10

  • HTC plans to implement a native Bitcoin full node on its next generation of EXODUS 1s

  • The biggest non-custodial wallet in Asia, ImToken, launched its native DEX in beta, based on both Kyber and 0x. ImToken has close to 10M registered users and is the biggest ERC-20 and ETH wallet in the world

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