OP-DLC 2: The truth is always simple

Discreet Log Contract (DLC) is an oracle-based contract execution framework that allows both parties to make conditional payments based on predefined conditions. It enables new decentralized financial applications while ensuring the security of Bitcoin deposits.

Although DLC has advantages in terms of privacy protection, complex contracts, and asset risks, it also has some issues. To address these problems, researchers have introduced decentralized oracles, threshold signatures, and optimistic challenge mechanisms. However, since DLC involves multiple participants, defense strategies become relatively complex.

Any action in Bitcoin must be executed through UTXO. Similarly, actions in DLC are executed through CET (Contract Execution Transaction). Therefore, using an optimistic challenge mechanism to ensure the correctness of CET can defend against various attacks. Specifically, after the oracle stakes 2BTC, it can sign the CET. By adding an optimistic challenge mechanism to the CET, if the CET is not challenged or successfully defends against a challenge, it is considered correct and can be settled, with the oracle releasing the stake and receiving a fee. If the oracle attempts to act maliciously, anyone can successfully challenge, and the CET will not be settled, causing the oracle to lose the stake and be unable to sign the same CET again.

DLC Principle

Taking the example of Alice and Bob signing a betting agreement, they bet on whether the hash value of a certain block is odd or even. DLC constructs conditional signatures by transmitting block information through an oracle, allowing the correct winning party to win all assets.

The process includes steps such as capital injection transactions, constructing CET, settlement, and withdrawal. Research has found that any action must be realized through CET, so it is sufficient to use an optimistic challenge mechanism to ensure the correctness of CET, which can resist various attacks. Incorrect CET will be challenged and not executed, while correct CET will be executed. At the same time, oracles must pay a price for malicious behavior.

OP-DLC 2

OP-DLC includes the following provisions:

1. Oracles are composed of alliances, and any member can sign CET. A pledge of 2 BTC is required to publish signatures and earn transaction fees.

2. If the oracle commits malicious acts to modify the result, any participant can initiate a challenge.

3. When the oracle honestly signs the CET, it can be correctly settled after 1 week and rewards will be obtained.

4. Anyone can challenge the Oracle_sign. Honest signatures will be settled one week later, unlocking the oracle's stake and earning transaction fees; dishonest signatures will result in the oracle losing its stake, and it will no longer be able to produce signatures with the same result for that contract in the future.

5. The challenge in OP-DLC is that it is permissionless, and any participant can monitor whether the contract is executed correctly.

The advantages of OP-DLC include:

• High asset control system, users can only trust themselves.
• High capital utilization rate
• The oracle that can sign must be determined at the time of deposit, but users can also become oracles.

Disadvantages include:

• Withdrawal time requires 1 week
• The number of signatures that need to be pre-signed increases linearly with the amount of CET.

Conclusion

OP-DLC introduces an optimistic challenge mechanism into CET, ensuring that erroneous CETs are not settled and that malicious oracles lose their stakes, while ensuring that correct CETs are executed and oracles receive transaction fees. This approach can withstand various attacks, reflecting the beauty of simplicity.