Non-depository Bitcoin vaults – CoinGeek

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This article first appeared on Medium.

We have developed a smart contract-based safe, in which Bitcoins locked inside can only be transferred after a user-defined time frame.

coffers

Key theft is a major problem that plagues Bitcoin users. One way to protect Bitcoins is to store them in a safe that prohibits instant withdrawal. To spend Bitcoins there, two sequential steps are required.

Issue a request to remove the coins from the vault in a first transaction, called unvault. Wait a predefined time (called a payback period), say 24 hours after the first transaction’s checkout, before the coins can be checked out in a subsequent transaction.

Both steps use a key called the vault key. Another key, called a recovery key, can have up to 24 hours to block the second transaction if the safe key is stolen. Typically, the safe key is stored in a hot wallet, while the recovery key in a cold wallet.

The first transaction signals that someone is trying to transfer the coins and gives the owner the option to block the second transaction which completes the transfer. Step 1 is to transfer money from a savings account to a checking account before spending it. Step 2 is like having 24 hours to reverse an unauthorized payment made from a checking account.

Implementation

Built on a relative timelock, we have developed the following vault contract.

Safe deposit box contract

At first, coins locked in the contract are canceled by calling unvault () on line 18 in a transaction. It basically mutates an un-vaulted state from false to true on line 22 and propagates the state to lines 24-26. If all goes well, the coins can be removed by calling remove () after the first transaction has been included in the blockchain for at least the non-evaluation period, at line 30. Lines 35-37 use the timelock relative as before. If a theft attempt is detected during this time, the recovery key may void the transaction and move the coins elsewhere on line 41.

Discussion

We have developed a deferred withdrawal safe.

Compared to safes offered by a trusted third party such as Coinbase, it is not a custodian. The user must monitor the state of the safe’s UTXO to detect if there is a transaction request¹. It does not require any consensus changes or new opcodes such as OP_CheckTemplateVerify in BIP 119 or OP_CheckOutputVerify in Bitcoin Covenants.

Additional measures can be added to make a safe even more secure, such as white lists or spending limits. It is also easy to expand it to contain tokens.

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REMARK:

[1] There are ways to do this without running a full node, like realtime notifications in mAPI.

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