TL;DR: LiquiDEX v1 improves upon v0 by removing the value blinding factors from the proposal, preventing the Taker from being able to replace the range proof. We replace the value blinding factors with value blind proofs and a scalar offset. This makes wallet integration far easier, less intrusive, and safer. Though there are some compromises: the Maker input must not have been sent from a potential Taker, and if a Maker is using a (un)blinded input, it must use a (un)blinded output. A working prototype is available in BEWallet. For further information or to discuss proposals, reach out to me here, or on the Build On L2 community platform - at launch.
LiquiDEX is a working protocol to perform 2-step atomic swaps on the Liquid Network. It requires a single interaction by the swap parties, drastically improving the UX. It can be used as a building block for implementing more complex systems such as automated OTC desks, auctions, or even a decentralized exchange (DEX). See the previous blog post for more details.
The Range Proof Issue
With Confidential Transactions, the unblinded information is encrypted in one of the output fields, the range proof. When a transaction is received, this unblinded information is decrypted and used for spending. However, such a field is not covered by the transaction signature. Thus, the Taker can replace its value and the Maker won’t be able to unblind the transaction.
In the previous blog post, we explained this was solved by using deterministic blinders, and (ab)use the nonce commitment field to encrypt the amount and (part of) asset id. However, this solution is quite complex and does not work with generic wallets (Elements Core or Green).
Solving the Range Proof Issue
A possible solution could be to use SIGHASH_RANGEPROOF, but it does not work in the LiquiDEX case. When using SIGHASH_RANGEPROOF, the signature covers the range proof, but it also covers the surjection proof. The Maker, however, is not able to create the surjection proof for its output, since there is no input with the same asset yet.
Another Approach
The goal is to prevent the Taker from being able to generate a valid range proof for the Maker output.
First, the Taker must be able to parse and fund the transaction, so the input (and output) assets and values must be shared by the Maker. Second, the Taker must be able to generate the surjection proof for the Maker output, thus the output asset blinding factor (asset blinder, abf) must be shared too. Third, the Taker must be able to generate the surjection proofs for its outputs with the asset sent by the Taker, thus the input asset blinding factor must be shared as well.
So we need to replace the input and output value blinding factors (value/amount blinders, vbf) with something that allows the Taker to verify the value commitments and to blind the transaction.
To verify the value commitment, we can use blind value proofs. A blind value proof is “An explicit value range proof that proves that the value commitment matches the explicit value.” Those are used in Partially Signed Elements Transactions (PSETs).To correctly blind a Confidential Transaction, the last value blinding factor, unlike all the other blinding factors, is not chosen at random, but so that inputs and outputs “sum up to 0.” In other words the sum of the inputs scalar_offsets is equal to the sum of the outputs scalar_offsets, where scalar_offset is defined as follows:
scalar_offset = abf * value + vbf (mod n)
The idea is that the Maker shares its scalar offset:
maker_scalar_offset = abf_o * value_o + vbf_o - (abf_i * value_i + vbf_i) (mod n)
There are some compromises, though, to avoid inadvertently revealing the value blinding factor.
Tradeoffs
The Maker input must not have been sent from a potential Taker. Otherwise, the Taker knows vbf_i and can compute vbf_o from maker_scalar_offset. Instead, vbf_i should have been chosen by the maker and kept secret; this can be achieved by doing a send-to-self transaction (which might also create a UTXO of the desired size).
Additionally, this implies that the Maker input should not stem from a LiquiDEX v0 swap.
If the Maker input is unblinded, then the Maker output must be unblinded; if the Maker input is blinded, the Maker output must be blinded. Otherwise, the Taker knows one of the value blinding factors (which is 0), and can compute the other value blinding factor.
Finally, when making multiple proposals with the same input, it is crucial to draw a fresh vbf_o whenever abf_o or value_o change. Otherwise, you have two distinct equations
maker_scalar_offset = abf_o * value_o + vbf_o - (abf_i * value_i + vbf_i) (mod n)
maker_scalar_offset' = abf_o' * value_o + vbf_o - (abf_i * value_i + vbf_i) (mod n)
with two unknowns, allowing the taker to compute vbf_o.
LiquiDEX v1
Let’s start from LiquiDEX v0 format to highlight differences and similarities:
{
"version": 0,
"tx": "...",
"inputs": [{
"asset": "...",
"amount": 1,
"assetblinder": "...",
"amountblinder": "...",
}],
"outputs": [{
"asset": "...",
"amount": 1,
"assetblinder": "...",
"amountblinder": "...",
}],
}
LiquiDEX v1 replaces the value blinding factors (value/amount blinder, vbf) with blind value proofs and adds a top-level field for the scalar:
{
"version": 1,
"tx": "...",
"inputs": [{
"asset": "...",
"satoshi": 1,
"assetblinder": "...",
"value_blind_proof": "...",
}],
"outputs": [{
"asset": "...",
"satoshi": 1,
"assetblinder": "...",
"value_blind_proof": "...",
}],
"scalars": ["..."],
}
In theory, LiquiDEX v0 proposals can be upgraded to LiquiDEX v1, but for the sake of simplicity at this stage, it’s best to consider this upgrade a breaking change. Note that we also replaced "amount" with "satoshi".
A Working Implementation
We developed a working prototype in BEWallet.
Install the wallet:
git clone https://github.com/LeoComandini/BEWallet-cli.git
cd BEWallet-cli
cargo install .
Maker list its coins to choose the one to be swapped:
$ bewallet-cli --testnet --electrum-url blockstream.info:465 --data-root $PWD --mnemonic "$MNEMONIC" get-coins | jq
[
...
{
"txo": {
"outpoint": "[elements]2dfaf9ca94fe817998456f02ab5093f5c1cf35e141efaf80212fe39ec4f6947c:0",
"script_pubkey": "a9144a597f4df12eea440e4e569f6e73b3e3b8794bdd87",
"height": 508358
},
"unblinded": {
"asset": "38fca2d939696061a8f76d4e6b5eecd54e3b4221c846f24a6b279e79952850a5",
"asset_bf": "9810d5b7987be0b2a2fecc3b0eb5e0a47e4386380f81c444659049890e8d0081",
"value": 100,
"value_bf": "f0450ba54ed42f13a56589317cd2fe2d28ce20796dacea8b49a14d806fce87a3"
}
}
]
Then makes the proposal:
$ bewallet-cli --testnet --electrum-url blockstream.info:465 --data-root $PWD --mnemonic "$MNEMONIC" liquidex-make --txid 2dfaf9ca94fe817998456f02ab5093f5c1cf35e141efaf80212fe39ec4f6947c --vout 0 --asset 144c654344aa716d6f3abcc1ca90e5641e4e2a7f633bc09fe3baf64585819a49 --rate 100
{"version":1,"tx":"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And sends it to the Taker, which can accept it:
$ bewallet-cli --testnet --electrum-url blockstream.info:465 --data-root $PWD --mnemonic "$MNEMONIC" liquidex-take --proposal '{"version":1,"tx":"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--broadcast
f831ae46f28ce47001a7f19b35652506f93815d2884d0de9df4f06b387739e50
The result is this transaction, which can be partially unblinded by the Maker and the Taker.
Future Improvements
Unlike LiquiDEX v0, LiquiDEX v1 does not need a custom way to unblind the output received by the Maker. Thus a specific wallet is not strictly necessary. For instance, it’s possible to write a small Python wrapper using the Elements Core wallet, an approach similar to the first three LiquiDEX prototypes described in the first blog post.
LiquiDEX v1 does not use PSET because it does not have a place to store the asset blinding factors. When that is possible, we will upgrade the version and use PSET.
Conclusions
LiquiDEX is a protocol to perform 2-step P2P atomic swaps. This improves the UX by requiring a single interaction between the Maker and the Taker, with reasonable compromises.
LiquiDEX v0 requires significant efforts on the wallet side to correctly and safely handle blinding and unblinding. LiquiDEX v1 removes the value blinding factors from the proposal, preventing the Taker from being able to replace the range proof. This makes the wallet integration far easier, less intrusive, and safer.
There are some compromises, though, the Maker input must not have been sent from a potential Taker, and if a Maker is using a (un)blinded input, it must use a (un)blinded output.
Acknowledgements
I’d like to thank Riccardo Casatta and Valerio Vaccaro for the tests and review, and Jonas Nick for providing feedback on the cryptographic design.
If you're interested in learning more about LiquiDEX and swaps on Liquid or discussing proposals, please reach me here, or on the Build On L2 community platform once launched.
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