OP-DLC 2: The truth is always simple.

1. Introduction

In 2018, Tadge Dryja from MIT proposed the Discreet Log Contract (DLC), which is a contract execution framework based on oracles. DLC allows both parties to make conditional payments based on predefined conditions, executing payments when the oracle signs the result by pre-defining possible outcomes and obtaining pre-signatures. This method ensures the security of Bitcoin deposits while enabling new decentralized financial applications.

Previous studies have analyzed the advantages and existing issues of DLC, and proposed some optimization schemes. However, since DLC involves multiple participants, the defense strategies are relatively complex, lacking simplicity and elegance.

In the Bitcoin system, all actions are implemented through UTXO. Therefore, ensuring the correctness of UTXO can resist arbitrary attacks. Similarly, in DLC, all actions are implemented through CET (Contract Execution Transaction). Using the optimistic challenge mechanism to ensure the correctness of CET can resist arbitrary attacks. Specifically, the oracle can only sign the CET after staking 2 BTC and adding the optimistic challenge mechanism to the CET. If the CET is not challenged or successfully responds to the challenge, it is deemed correct and settlement is completed, with the oracle releasing the stake and receiving a fee. If the oracle attempts to act maliciously, anyone can successfully challenge, resulting in the CET being unable to settle, the oracle losing the stake, and losing the right to sign again. This method aligns with the principle of 'simplicity is the ultimate sophistication' and has an elegant simplicity.

2. The principle of DLC

Take a simple betting agreement as an example: Alice and Bob bet on whether the hash value of the ξth block is odd or even. If it is odd, Alice wins; if it is even, Bob wins. DLC conveys block information through oracles and constructs conditional signatures so that the correct party receives all the assets.

The main steps of DLC include: funding transactions, constructing CET, settlement, and withdrawal. In this process, all actions need to be realized through CET. Therefore, by simply using the optimistic challenge mechanism to ensure the correctness of CET, it can resist arbitrary 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 actions.

3. OP-DLC 2

The OP-DLC includes the following five main provisions:

1. The oracle is composed of a consortium, and any member can sign CET. The oracle needs to stake 2 BTC to issue signatures and earn transaction fees. Malicious members will lose their stakes, while other members can continue to sign CET to ensure user withdrawals. Users can also become oracles to achieve trust minimization.

2. If the oracle maliciously modifies the result, any participant can initiate a challenge.

3. When the oracle honestly signs the CET, no one can initiate a valid challenge. After one week, the CET can be settled correctly, and the oracle receives a reward of 0.05 BTC.

4. Anyone can challenge Oracle_sign. Honest signatures cannot be successfully challenged and will be settled a week later. Dishonest signatures will result in the oracle losing its staked collateral and losing the right to sign again for that DLC contract.

5. The challenge in OP-DLC is that it is permissionless, allowing any participant to oversee the execution of the contract. This achieves trust minimization in oracles, and users can also be offline.

The advantages of OP-DLC include:

• Users have high control over their assets and can only trust themselves.
• High capital utilization rate
• The signable oracle is determined upon deposit, and users can become oracles.

Disadvantages include:

• Withdrawal time takes one week
• The number of pre-signed is linearly related to the number of CET, with rapid growth.

4. Conclusion

OP-DLC introduces an optimistic challenge mechanism to CET, ensuring that erroneous CETs are not settled and malicious oracles are punished, while guaranteeing that correct CETs are executed and oracles receive their deserved rewards. This method is resilient against arbitrary attacks, reflecting the beauty of simplicity.