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We've got resources and lots of contributors. Time to find consensus.

By Dan Gould

Published on Aug 16, 2023 on

On July 27, HRF announced a 2 BTC bounty for a production deployment and specification of a version 2 payjoin spec to receive payjoin without hosting a server. This past week I proposed a new BIP and call for feedback in search of consensus on what that spec should be. Many new ideas were born. This is my attempt to make sense of them.

This idea first manifest itself in this January mailing list post, inspired by attempts to address the hosting barrier with Tor or application-specific payjoin implementations. Incompatible implementations are the status quo, so payjoin use is limited in practice. The good news is that community and industry show great interest in coming to consensus so that a new version has as wide adoption. The technology to guarantee privacy and usability is now available to do so too.

Adam Gibson and Dave Harding helped define a concrete threat model and proposed better crypto to address it. Symphonicbtc and Christopher Allen proposed encoding specifics to improve user experience to keep payjoin request QR codes small inside the bitcoin URI standard. Apparently, the day after the bounty was announced, Kukks submitted a slick proposal using nostr extending /dev/fd0’s nostr payjoin implementation for both network transport and encryption. Contributors on Twitter, Nostr, and Stacker News and in private all voiced feedback that they want to see change and shared the features they want most.

A way to send messages

To send payjoins we need a way for sender and receiver to communicate to one another. To make it work when one party is offline, we need a box in the middle to store and forward their messages. The original BIP proposes WebTransport, a modern web standard with low latency in mobile environments, and backwards compatible fallback to HTTP. WebSockets could work fine as well.

Popular feedback has been to use nostr. I love nostr for sharing notes. It’s simple, censorship resistant, and has created a cult following. The people I want to talk to share notes there too. Under the hood, Nostr chooses WebSockets, JSON, and requires each message be signed. There are already dozens of free relays anyone can post and listen to. Rijndael summed it up: “nostr is MQTT for web devs,” meaning anyone can publish and subscribe to the messages they’re interested in.

The main argument to use nostr transport is that relays are running for free already so (mistakenly) no payjoin-specific relay has to be run. Kukks’s implementation uses nprofile identifiers in the `pj=`URI parameter to share identities and relays at the same time. I say this is mistaken because as-is, such a solution would not be backwards compatible, and to make it backwards compatible, it would need payjoin-specific components. Without them, payjoin requests using nprofile identities would fail silently in current implementations, leading to even more fragmentation users already complain about. Fragmentation is the problem we’d like to address in the first place. Ammending payjoin v1 instead of introducing v2 closes the door on the opportunity for us to upgrade to PSBTv2 as well.

PSBT version 1 was created to fascilitate cold storage signing and multisig coordination. It was built before interactive protocols were as popular so does not support input and output map mutation. PSBT version 2 does. I see this opportunity to specify a new application protocol to inspire software to upgrade. Cooperative transaction building scales bitcoin by batching better, saving fees as a result, and offering the opportunity to preserve everyone’s privacy with as in payjoin.

One worthwhile possibility is to convince the 10+ extant BIP 78 payjoin implementations to just upgrade in lockstep. They all have a history of collaboration. In my opinion, we need unanimous support to justify such a change, and are better off upgrading to a new payjoin version 2 so we can use PSBTv2 without hiccups.

The bigger issue I see with nostr as transport without payjoin-specific components is that it would rely on nostr cryptosystems, namely NIP 4, which comes with a damning security warning: “This standard does not go anywhere near what is considered the state-of-the-art in encrypted communication between peers, and it leaks metadata in the events, therefore it must not be used for anything you really need to keep secret.”Payjoin messages really need to keep secret. NIP 4 is not viable for payjoin.

Well kept secrets

Payjoin is a technology whose users depend on it for privacy, and that privacy only holds if the messages stay secret. The privacy basis for payjoin transactions is their indistinguishably from many types of other typical transactions and the inability of an outside observer to distinguish which output belongs to a which input, even with knowledge that the transaction you’re looking at is payjoin. If the first message coordinating a payjoin, the Fallback PSBT, were comrpromised, the result would provide no privacy at all. The message it contains both the transfer amount and the inputs belonging to the sender which the Payjoin PSBT would otherwise protect.

The original Serverless Payjoin proposal encrypted the messages using a symmetric key shared in the payjoin request URI for simplicity. Careful consideration of user expectation will reveal that this can lead to an attack. If the relay finds out the URI it would be able to decrypt message contents and also forge messages as the receiver and steal funds through output substitution, replacing the receiver’s output with their own. Bitcoin users understand that leaking addresses in URIs can leak privacy, but don’t expect doing so to put their funds at risk. This attack can be prevented by sharing a receiver public key in the BIP 21 instead of a secret, and transmitting a sender public key inside the first encrypted message.

Diffie-Hellman key exchange before messaging would allow both messages to be protected from a single party key compromise with the cost of an additional round of communication. I suggest Serverless Payjoin foregoes this tradeoff for the sake of convenience, instead relying on per-session asymmetric keys. That way, payjoins can be done in a single round of communication while the only way messages would be exposed were if they were compromised before or during the session as long as they are safely deleted afterward and never reused.

Metadata matters

While Nostr could be used for per-session encryption the same way, a culture of key reuse and copying secrets into web pages has emerged as the way to “log in.” Even Kukks’s proposal accommodates key reuse, which gives me further pause about relying on Nostr standards for message secrecy. Payjoin messages on Nostr would be trivial to identify. A malicious relay could collect messages signed by reused keys and put payjoin participants’ privacy at risk.

Beyond the contents of the messages themselves, a relay having knowledge of IP addresses associated with sender and receiver as well as the timing of candidate payjoin transactions is in a special position to carry out targeted attacks to spoil any privacy benefits. If it can correlate IP address activity with on-chain transactions by timing, it can reveal the underlying transfers that the payjoin would otherwise keep private. Knowing the order of connections could reveal which IP was the sender and which was the receiver. In order to keep payjoin data secure, this metadata must be protected as well as message contents.

To keep your secret is wisdom; but to expect others to keep it is folly — Samuel Johnson

Adam Gibson and Matt Corallo have suggested that payjoin messages be padded in order to prevent a relay from correlating them with transactions on chain. I wholeheartedly agree. This simple change protects users at virtually no cost. Whether to use a constant size (based on the maximum size of the encreypted PSBT and parameters) or random padding remains unspecified. I’d love to hear your suggestions here.

Adam noted that timing could be used to correlate IP-related payloads with on-chain activity on bitcoin-dev. He resurfaced Tor as a solution, which I’d like to avoid. BIP 78 Tor receivers do exist, but they’re incompatible with senders who don’t support Tor. In order for a Serverless Payjoin solution to grow, new clients of version 2 should be able to communicate with every other v2 client and not get siloed into the choices of specific clients. And many wallets who’d prioritize privacy to some extent still choose not to use Tor because of the usability hurdles it presents.

A random delay between the sender receiving a transaction and broadcasting it may be the simplest way to break up correlation between the time a payjoin was coordinated and the time it made it into mempools or on chain. Unfortunately this doesn’t keep the relay from linking the IPs to senders and receivers.

A hopeful alternative might be Oblivous HTTP. OHTTP is a relatively new IETF standard that works on the same principles as Tor, but without the complexity of its own decentralized consensus mechanism and the latency symptom of sending requests over a great many hops. Instead, it does the minnimum necessary to separate IP addresses from requests. OHTTP is supported by iOS, Cloudflare, Chromium and Firefox, and has maturing libraries in Rust and Go. In Firefox it is used to separate a user’s IP address from its DNS queries. I have confidence it will become widely available to support our goal of payjoin adoption.

In the context of a relayed payjoin it also makes a lot of sense. The payjoin relay server would have to understand OHTTP as a gateway Resource The receiver allocated buffer on the relay assumes the role of target resource. It could take requests from any OHTTP relay resources which would be operated by entities independent to the payjoin relay, like VPN providers you pay to be independent or non-profit organizations with reputations of being so.

Such an architecture would be a major simplification compared to Tor and provide a similar privacy benefit by keeping the clients’ IP addresses from the payjoin relay, increasing the costs of targeted attacks mentioned earlier by requiring collusion between multiple independent entities. An architecture based on OHTTP could even allow backwards v1 compatibility for senders, but would not provide the same privacy guarantees.

Let’s come to consensus

Serverless Payjoin is meant to lift barriers to adoption and increase real world payjoin by improving compatibility across varied software environments. A successful lift may require payjoin-specific relays, but that’s no news to bitcoin. Every wallet already runs some infrastructure on behalf of themselves or their clients, and one payjoin relay could support many wallets and services. The protocol is being vetted and specified in public, so you’ll be able to self-host too.

Getting encryption and metadata protected is as critical as the transaction structure to maintain privacy. If we can’t get the existing implementations to commit to a timely upgrade, backwards compatibility should be considered necessary to accomodate payjoin v1 senders. We should take this opportunity to leverage PSBTv2. I’m confident in the BIP process to deliver quality software and encourage feedback on the evolving BIP gist. Thanks for your participation, bitcoin privacy is better for it.

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