Simple implementation of Bitcoin CoinSwap, client-server
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README.md
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README.md

CoinSwap-CS

A simple implementation of CoinSwap with Carol as server and Alice as client.

Navigation

What is CoinSwap ?

More details on how it's done here.

Is this ready to use?

How to install it?

Risk factors

What needs doing

Testing

More background on the ideas

More detailed documentation

Coinswap basics

CoinSwap was proposed in 2013 by Gregory Maxwell; I'd advise reading through the general outline in that post first, even though you're unlikely to understand it all at once. It gives the main motivation - break the history of the coins you own by "swapping" some of your coins with someone else, but without having to trust them to hold your coins. It also gives a lot of useful context, such as how it compares with CoinJoin.

Absolute brain-dead description: you pay in coins to a 2 of 2 address you agree with your counterparty, and after a little time, you get out coins from a different 2 of 2 address, which originally came from your counterparty, so your new coins have none of your old history. They're "disconnected". You never have to trust the other side with your coins.

If you want more info about the general ideas without delving into code, jump to background.

Coinswap details

The original proposal contains a flaw; I have written up a brief description of my own proposed fix here, and it's this version of the protocol that's implemented in this code. I would welcome further peer review on this; there may be other tweaks possible to the basic arrangement.

Critical to making it work is:

  • accurate and up to date blockchain information - hence this code assumes use of Bitcoin Core as a full node
  • Recovery in case of any malicious or accidental failure - hence the code persists the current state at every step to allow either party to recover and claim their coins, including if the code or machine crashes.

The "CS" in "CoinSwapCS" refers to "client-server"; this is a slightly squishy point. The intention is not of course to have a "single server" that everyone uses; this loses a lot of the value, and is dangerous. Rather, the intention is to have long-lived participants serving clients, to make it easier to use. There is no restriction on who can be such a server, other than having to stand it up on a machine with a hot wallet. The exact way this is done is left open; a hidden service over Tor is implemented as the default, while HTTP and TLS clearnet exist as options, but other possibilities should be easy to add.

Who are Alice and Carol?

There are references to Alice and Carol peppered around, this is an artifact of the fact that the original proposal was for Alice to send coins to Bob via Carol, but there is no requirement for 3 people to be involved. The more natural case is Alice also acting as Bob (so Alice is the receiver as well as the sender), so that this becomes a 2 party rather than 3 party protocol. Of course Alice could send Bob coins using this, in that the recipient address might not be Alice's own (but bear in mind since it's a little slow this use case is a bit impractical). So for now, just treat "Alice" as "client" and "Carol" as "server", with the effect that the two parties swap the history of their coins.

Should they really be "client" and "server"?

As you'll understand from reading more into the technical design of CoinSwap, it's very undesirable for the protocol to fall into "backout" mode. You lose a small amount of extra fees, you lose a lot of time in some cases (the most important), and you are potentially losing privacy - instead of your transactions looking like other P2SH transactions, they are now unambiguously CoinSwap style transactions, and moreover, you may not end up getting disconnected coins, depending on the specific backout that happens - then you'll have wasted money and time for nothing.

Avoiding this scenario if your counterparty is malicious is hard, so it makes sense to be a bit less ambitious, and have a more client-server mode where the server can still be anonymous, but more like pseudonymous - e.g. running the "service" via Tor. That way a "client" can rely on the reputation of servers that he has some vague confidence are unlikely to cause him annoyance by backing out. Now, of course, if everyone uses one server, then that server has a ton of private address-connecting information, which is not desirable. But it's a little like VPNs - trusting them to never reveal logs is not very realistic, but imagine being able to mix and match lots of different ones. You could use many different "CoinSwap" servers, especially if they're easy to set up. And even if you didn't, you've vastly changed what a snooper has to achieve in order to connect all your coins.

Project readiness

Is this ready to use? NO.

There is a testnet coins server running at fwjpp2ae5zcrccv7.onion:1234.

The code is sort-of ready for testnet testing (done a few runs), you're welcome to follow the installation guide below, try coinswaps (with the above server ideally) and report issues. A 0.0.1 release will be made shortly, which will mean the code is 'officially' ready for testnet testing. Releasing for mainnet is still a way off (see Milestone 0.1). The open issues are listed in What needs doing.

Installation

Moved to a separate document.

Risk factors

Coinjoin is perfectly atomic in the sense that a single coinjoin transaction either happens or it doesn't. Coinswap being a multi-transaction protocol, it requires a bit more. Here are the things that can go wrong:

  • If your blockchain interface (to Bitcoin Core) is giving you wrong information, you may think that a transaction has happened when it hasn't. This could result in loss of funds. This is a very difficult attack for someone to pull off, if you're running a full node in a sensible way (Of course, this attack can be used against other things than CoinSwap too).
  • If your program crashes, or you lose power, or the other side crashes or gives wrong information, or there is a serious network failure: all of these cases are handled by the "backout" code, which will reclaim your funds - but if it was your side that crashed (if not, the backout happens in-run), you must restart before the timeout to be sure of keeping your funds. Hence, this is not a "set and forget" protocol. If all goes well, you will only need to wait for a couple of confirmations (by default) on the first transaction, plus a short amount of time afterwards, to be sure that the protocol completed OK and you're safe. But if during that time, something goes wrong, you may have to wait considerably longer - a few hours, to be sure of receiving the funds back.
  • Loss of files - if you remove or lose the session file (stored in ~/.CoinSwapCS/sessions by default), and your own program crashed or stopped, the funds will be unrecoverable. Obviously this is highly unlikely.

Clearly it's the second of those three that is the most concern: CoinSwap is not something you can start running and then go off on a journey. You should be prepared to hang around for a few hours, although the vast majority of the time, you won't have to. This could be greatly improved with more sophisticated code to restart, but that won't help if there's a power outage, for example.

TODO list

It goes without saying that help with this would be appreciated!

Using this repo's Issues list to track this.

You can find a list of features that are needed and bugs to fix.

Testing

The instructions on how to test are in the test README

Background

Some background motivation might be in order here: this project is part of the ongoing efforts to improve Bitcoin's fungibility. There are now a lot of different approaches being taken to this, including: Coinjoin (see Joinmarket, see Coinshuffle, under development, plus other implementations like DarkWallet and SharedCoin which are no longer active), there's also Tumblebit, currently in testing on testnet, stealth addresses, you could even add OpenDime, plus projects with a broader scope but including fungibility/privacy like the Lightning Network.

My first contact with CoinSwap was having Peter Todd point me to it in a half-derelict building in Milan nearly 4 years ago (long story!). I didn't really understand it except in very broad terms, but it was a class of ideas that people have been mulling over for many years. See e.g. the idea Atomic Cross Chain Swaps , which is related but not the same. So lots of "mulling over" occurred, but as far as I can see no one actually implemented CoinSwap in code anywhere in the last 4 years. And in the meantime other, more advanced "contracts" have been developed which shared at least some aspect of this basic idea (see e.g. the "HTLC" or "hash time locked contract", which forms a critical piece of the Lightning Network design). And TumbleBit also uses a somewhat similar concept, but considerably "souped up" by adding the cut-and-choose protocols allowing payment for Bitcoin signatures (long story here too, but if you are interested in this stuff I highly recommend taking the time to understand it). So CoinSwap in this broader context, is almost like a kind of old curiosity - an idea that never really went very far. Why is this?

I think a big part of the answer is inconvenience. Coinjoin is by nature a very "lazy" protocol. It's very simple, because it's actually just Bitcoin - literally. Any Bitcoin transaction is intrinsically a potential coinjoin, as long as it has > 1 input and > 1 output. It requires no state management, because a Bitcoin transaction is itself atomic. So people naturally started trying to include it in Bitcoin software as early as 2013/14, shortly after it was proposed. CoinSwap, on the other hand, needs state management and even in a cooperative case, requires 4 separate transactions to happen (in the form used here), and 6, usually, in the non-cooperative case. That combined with the delays required (safe timeouts) likely means that it takes ~ 30min-1hr if everything goes well, and likely to take several hours in certain cases if something goes wrong. This combination (complexity of coding, and delay in using) probably put people off.

But even considering these negatives, there still may be something quite valuable here. First, there is the matter of fees. Effective use of coinjoin, to really gain significant fungibility, requires a large-ish number of large Bitcoin transactions, which means the fees really add up - see the notes I wrote on this point here. (the situation has since got worse). Intrinsic to CoinSwap is the fact that it causes an actual break in the history of owned coins, without requiring lots of counterparties or lots of transactions. For these reasons, a similar (or better) level of fungibility can be achieved for far lower fees. There is also the question of anonymity set: in the cooperative case, CoinSwap involves transactions using p2sh addresses, which look in no way different from typical, non-CoinSwap transactions. By contrast, a single CoinJoin, at least in the Joinmarket model, and in most reasonable-to-propose others, has an anonymity set of the participants in the join. Although that isn't the whole story, it makes it a very tempting model on which to base fungibility efforts, in this time when blockchain space commands a much higher premium.

So if you've got this far, you get the general overall view: it's potentially much more effective than Coinjoin, almost certainly cheaper, but more complex and slower. At the same time there are now other potential systems, not yet active - TumbleBit and Lightning, in particular, that are far more complex still, but could well be, in the long run, the best options. But they are not yet ready, and are not unconditionally better than CoinSwap, in any case. CoinSwap may have a place in the fungibility tapestry of Bitcoin.