The post Bitcoin OP_CAT use cases series #3: Vaults appeared on BitcoinEthereumNews.com.

This post was first published on Medium. Following our series #1 and #2, we demonstrate how to construct non-custodial vaults, to provide enhanced security for stored bitcoins. They are typically used to protect against theft by requiring a time delay to access the funds. We can think of vault smart contracts as special accounts whose keys can be neutralized if they fall into the hands of attackers. Vaults are Bitcoin’s decentralized version of calling your bank to report a stolen credit card, rendering the attacker’s transactions null and void. This disincentives key theft in the first place, as attackers know they cannot get away with theft. How Vaults Work Funds locked in a vault contract can be accessed using either of two keys: a vault key, which is intended to be kept online and stored in a hot wallet, and a recovery key, which is kept securely offline in a cold wallet and used only for recovery. Typically, the vault key is used to create transactions that spend coins from the vault. Regardless of which key is used, any funds spent from the vault must pass through a time lock that holds the funds for a fixed period, such as 24 hours. This mechanism ensures that if a malicious actor obtains the vault key, they must broadcast a time-locked transaction on the blockchain before gaining access to the funds. This gives the vault owner a 24-hour window to detect the unauthorized movement of their funds and take action. During the time lock period, the contract allows the funds to be redirected to another address using the recovery key. To spend bitcoins from a vault, two sequential steps are required: Issue a withdrawal request to move coins out of the vault through a transaction known as an unvault. Wait for a predefined period (called the unvaulting period), such as 24 hours, after the first transaction…

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Filed under: News - @ July 2, 2024 7:28 am