What’s the best breakdown of covenants?
From my limited exposure I got a negative vibe. But want to be sure I understand thoroughly both arguments before I make up my mind.
Discussion
I got a decent idea of what they are from this article
Best to say “no” for as long as possible. Feature creep is inevitable. Experiment on shitcoins first.
It seems like people could build other layers that are tied to Bitcoin without fucking with the base layer. That's sort of how I see things like Lightning, ecash, etc.
What’s your specific worry?
Censorship risks arise from flexible covenants, allowing governments or corporations to enforce
- Allowlists: Bitcoins can only be spent to approved addresses.
- Denylists: Bitcoins cannot be sent to specific addresses (e.g., sanctioned entities)
Even if these restrictions aren't feasible in the initial implementation, introducing programmable spending conditions could increase Bitcoin's vulnerability to regulatory pressure
'Covenant' seems to be a general term for an idea rather than any single specific protocol proposal (from what I've seen anyway).
I do think it would be interesting to do stuff like estate planning at the protocol level (that seems like a potential use case from what I understand so far), but I'm not sure it's worth the added complexity. Maybe it is depending upon the specifics.
I'd rather address more pressing matters like having a solid plan for upgrading encryption over time and general maintenance stuff like that before adding anything else in.
Time locks and vaults seemed like an unnecessary luxury but it seems there are other use cases. I’m just curious why we NEED them and why it’s not a “nice to have”
I guess I have a lot of reading to do.
In any case, I think the people who want covenants have to make a case for them and not fall back to “do your research”.
Countries, nations and big institutions will find covenant useful.
Personally I don’t like them, it’s coin control and a limitation on what bitcoin provides.
If y'all want total BTC supremacy and an accelerated demise of alt coins, smarter capabilities are simply a requirement.
Ironically, I think adding these "capabilities" makes BTC vulnerable to censorship and opens the door to cooptation by bad actors.
For instance, it's quite simple to see how a bad actor like governments and/or their bank cronies may require that all BTC within "their" jurisdiction be filtered through some sort of covenant that heavily conditions the future use of the UTXOs. If a UTXO doesn't come through that funnel, it becomes "illegal". Expect all those MSTR and ETF UTXOs to be immediately funneled and a de facto soft fork to happen.
My opinion is, this is the sort of extremely undesirable consequence of idiotic maximalism, which as I said, I find quite ironic.
Because alts are perceived as a threat instead of as a complement, and because idiot maxis want BTC to monopolize all spaces and functions, they will inevitably introduce all the bad potentials too.
I say let alts take care of "smart" and unsafe stuff and keep BTC dumb and safe.
I don’t think bitcoin maxis want or promote a fork to implement covenants.
Shitcoins are there, they will eventually die… new ones will appear.
Adding smarter contracts to bitcoin, as you said, won’t keep Bitcoin safe.
What’s the counter argument? Lightning doesn’t scale to world population?
Is not perfect.
But I rather have “smart” stuff on layer 2. Lightning, or whatever comes.
Bitcoin should remain as it it, taproot was a good upgrade and if people really wanted it could allow for covenants as it is.
I can perfectly live without covenants. There’s enough we can achieve with taproot. We don’t need more innovations.
I'm a million percent on this boat. This sounds like the beginning of a terrible idea.
The road to hell is paved with good intentions. These people should find a real problem to solve outside of Bitcoin. There's plenty there.
Bitcoin scales by sharing UTXO ownership. On lightning, a UTXO is shared between two entities. That's a start, but you won't onboard earth population, and they have to be online to transact. Custodial solutions also share their UTXO with all the members they provide service to. Better scaling, but well, you know, it's custodial.
The thing is, we're struggling to non-custodially share a UTXO between more participants, especially if they can't be frequently online. We've been shearching since the early days of lightning. Having a covenant that protects your share of the UTXO while you are offline seems to be the missing piece of the puzzle every single time.
There are proposals that go into this direction, but it still feels unclear for now. I think we need a covenant, coupled with a protocol proposal (Ark maybe ?) that enables just that, and not too much more.