Transaction malleability and segregated witness (2014-2017)

Bitcoin’s transaction id hashed the whole transaction, signatures included. Anyone relaying a transaction could alter its signature encoding without invalidating it, changing the id. In 2014 the Mt. Gox exchange blamed malleability for lost withdrawals; Decker and Wattenhofer found it explained only a small fraction. Segregated witness (2017) moved signatures out of the id, which also made payment channels such as Lightning safe to build.

The same payment, signed twice, has two txids: a child transaction that named the first id would point at nothing. The unsigned id, like SegWit’s txid, is the same for every valid signature.

import matplotlib.pyplot as plt

import blockchainkit as bk

One payment, two signatures, two txids

alice_key = 7
payment = bk.structures.Transaction(
    bk.crypto.public_key(alice_key), bk.structures.address(bk.crypto.public_key(11)), 25, 0
)
first = payment.signed(alice_key, signing_nonce=1001)
second = payment.signed(alice_key, signing_nonce=2002)  # Same payment, re-signed.
assert first.is_valid() and second.is_valid()
assert first.txid != second.txid
assert first.unsigned_id == second.unsigned_id
print("txid:       ", first.txid.hex()[:16], "vs", second.txid.hex()[:16])
print("unsigned id:", first.unsigned_id.hex()[:16], "for both")

txid:        fa96fe8ee56adcbe vs df5d5b6e70155532
unsigned id: bf31ad29acf982f8 for both

A child that names its parent by txid breaks

child_refers_to = first.txid
confirmed = second  # A miner confirmed the re-signed version.
assert child_refers_to != confirmed.txid
assert first.unsigned_id == confirmed.unsigned_id  # A SegWit-style reference still works.

ids = {f"signature {n}": payment.signed(alice_key, signing_nonce=n) for n in (11, 22, 33, 44)}
fig, ax = plt.subplots(figsize=(8, 3))
for row, (label, tx) in enumerate(ids.items()):
    ax.text(0.02, row, label, va="center")
    ax.text(0.30, row, tx.txid.hex()[:20], va="center", family="monospace", color="#dc2626")
    ax.text(0.68, row, tx.unsigned_id.hex()[:20], va="center", family="monospace", color="#16a34a")
ax.text(0.30, len(ids), "txid (covers signature)", weight="bold")
ax.text(0.68, len(ids), "unsigned id (SegWit)", weight="bold")
ax.set(xlim=(0, 1), ylim=(-0.7, len(ids) + 0.5), title="Re-signing changes one id, not the other")
ax.axis("off")
ax.invert_yaxis()
fig.tight_layout()

plt.show()

Exercise

In Lightning, two parties pre-sign a refund transaction that spends a funding transaction before it is broadcast. Explain why the refund needs an id for its parent that cannot change.