Implement proof of concept of Eltoo

[AndrejMitrovic]

As mentioned in #1266, there are currently two main competitive LN update mechanisms. LN-Penalty, and Eltoo. LN-Penalty has three compatible implementations, whereas Eltoo is still blocked from being developed & deployed on Bitcoin due to a requirement for a new sighash type (BIP 118).

LN developers seem to be in agreement that Eltoo is a great evolution over LN-Penalty, and may end up replacing the penalty update protocol. Note that both protocols can be used at the same time on Bitcoin.

In our case we have a big advantage over Bitcoin. We can develop the protocol without being blocked by the requirement of doing a soft-fork. In addition to that our PoS system could potentially make it easy to create multi-party channels - we could even make this multi-party channel creation be part of the protocol rules (think quorum shuffling, for example).

As a first step we can try to implement a proof of concept of Eltoo. There are many moving parts, and we should aim to have the simplest proof of concept.

This will probably require the following:

• Implement witness (script) fields
• Implement very simple stack-based execution engine with only the required opcodes (e.g. time locks, sequence matching)
• Implement sequence number for script matching (this might even possibly be optimized out later with schnorr tricks, I need to experiment)
• Add support for sighash_noinput
• Add HTLC support for multi-hop payments
• Allocate anything over >40K funds for channel creation

Thereafter it should be fairly simple to implement multi-party channels as well.

[remyers]

I implemented a PoC eltoo test script using the original BIP-118 segwit version of eltoo. This might be of interest if you are implementing eltoo, but needs to updated for Taproot version of anyprevout.

https://github.com/remyers/bitcoin/commits/anyprevout

[AndrejMitrovic]

Hey @remyers! Thanks, I was aware of that implementation. I was in contact with Christian Decker about existing implementations and ideas and he mentioned your work.

[AndrejMitrovic]

Resolved in #1610