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True no one can lock your #Bitcoin into a #covenant but are you not concerned for the value of your bitcoins that an ever growing share of the supply will be forcibly KYCed? With convenants, every Bitcoin that at one point touches a regulated entity (centralized exchange, ETF, miner, MicroStrategy, etc) will become a KYCed Bitcoin forever.

BitcoinStu 1y ago

Yes, BIP-119 and similar proposals are an extreme threat to Bitcoin's use as a permissionless network. It can be implemented with a soft-fork so probably it will happen in time. Eventually this tech can and probably will be used to manage whitelisted addresses, combined with AML regulations.

In time it will be both illegal and technically impossible to send bitcoin to any address not whitelisted by western banking regulators.

If you need to hide your money, use Monero. If you can use KYC'ed money then Bitcoin will remain a durable store of value.

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Discussion

BitcoinStu 1y ago

Important to note though that this kind of KYC enforcement can be implemented today using multi-sig

LogicallyMinded 1y ago

I don’t think multisig could be used to attached spending conditions to an output forever like recursive covenants could. How would multi-sig do this?

BitcoinStu 1y ago

your KYC bitcoin provider requires you to receive using a multisig address in the same way they would require you to receive using a covenant. If you search you can find interviews of Adam Back talking about this exact subject. His opinion covenants are not a threat that is not already a threat by multisig

LogicallyMinded 1y ago

I would need to research more about the specifics but my intuition is that although it’s possible, it wouldn’t be practical to implement and/or not scalable. It seems that #covenants would make it very easy and that’s why they are dangerous. Pointing this as the argument to justify that #covenants aren’t a threat seems weak.

BitcoinStu 1y ago

restricting with recursive covenants would be extremely complex to do, just like a multisig KYC lock would be. But both are possible in theory. One can be done today, the other requires a softfork.

Your intuition is wrong, so I suggest you take your own advice and research more.

BitcoinStu 1y ago

A whitelist address server is far more scalable than bitcoin. It would also be quite possible, practical, to implement. It could be done today with multisig. You simply have a 3rd party api that you call to get a signature for the multisig send. If the output address doesn't appear in the whitelist, signature denied.

This is the same thing they could potentially do with covenants except it can be done today without a softfork.