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Staking Transactions

Specification of all the transactions, which is for those who want to construct Bitcoin staking related transactions by themselves instead of using our code or dapps.

Introduction​

A lock-only network involves users locking their Bitcoin using the self-custodial Bitcoin Staking script without a Babylon Genesis operating. In this document, we precisely define how one can construct the Bitcoin transactions specified by the Bitcoin Staking protocol.

Prerequisites​

  • Scripts doc - a document which defines how different Bitcoin Staking scripts look like
  • BIP341 - a document specifying how to spend Taproot outputs

System parameters​

The lock-only staking system is governed by a set of parameters that specify what constitutes a valid staking transaction. Based on those, an observer of the Bitcoin ledger can precisely identify which transactions are valid staking transactions and whether they should be considered active stake. These parameters are different depending on the Bitcoin height a transaction is included in and a constructor of a Bitcoin Staking transaction should take them into account before propagating a transaction to Bitcoin. For the rest of the document, we will refer to those parameters as global_parameters.

More details about parameters can be found in the parameters spec.

Taproot outputs​

Taproot outputs are outputs whose locking script is an elliptic curve point Q created as follows:

Q = P + hash(P||m)G

where:

  • P is the internal public key
  • m is the root of a Merkle tree whose leaves consist of a version number and a script

For Bitcoin Staking transactions, the internal public key is chosen as:

P = lift_x(0x50929b74c1a04954b78b4b6035e97a5e078a5a0f28ec96d547bfee9ace803ac0)

This key is described in the BIP341 specification.

The use of this key as an internal public key disables spending from Taproot output through the key spending path. The construction of this key can be found here.

Observable Staking Transactions​

Staking transaction​

A staker enters the system through the creation of a staking transaction which locks Bitcoin in the Bitcoin Staking script.

Requirements​

For the transaction to be considered a valid staking transaction, it must:

  • Have a Taproot output which has the key spending path disabled and commits to a script tree composed of three scripts: timelock script, unbonding script, slashing script. This output is henceforth known as the staking_output and the value in this output is known as staking_amount
  • Have OP_RETURN output which contains: global_parameters.tag, version, staker_pk, finality_provider_pk, staking_time
  • All the values must be valid for the global_parameters which are applicable at the height in which the staking transaction is included in the BTC ledger.

OP_RETURN output description​

Data in the OP_RETURN output is described by the following struct:

type V0OpReturnData struct {
	Tag                       []byte
	Version                   byte
	StakerPublicKey           []byte
	FinalityProviderPublicKey []byte
	StakingTime               []byte
}

The implementation of the struct can be found here

Fields description:

  • Tag - 4 bytes, a tag which is used to identify the staking transaction among other transactions in the Bitcoin ledger. It is specified in the global_parameters.Tag field.
  • Version - 1 byte, the current version of the OP_RETURN output.
  • StakerPublicKey - 32 bytes, staker public key. The same key must be used in the scripts used to create the Taproot output in the staking transaction.
  • FinalityProviderPublicKey - 32 bytes, finality provider public key. The same key must be used in the scripts used to create the Taproot output in the staking transaction.
  • StakingTime - 2 bytes big-endian unsigned number, staking time. The same timelock time must be used in scripts used to create the Taproot output in the staking transaction.

This data is serialized as follows:

SerializedStakingData = Tag || Version || StakerPublicKey || FinalityProviderPublicKey || StakingTime

To transform this data into OP_RETURN data:

StakingDataPkScript = 0x6a || 0x47 || SerializedStakingData

where:

  • 0x6a - is byte marker representing OP_RETURN op code.
  • 0x47 - is byte marker representing OP_DATA_71 op code, which pushed 71 bytes onto the stack.

The final OP_RETURN output will have the following shape:

TxOut {
 Value: 0,
 PkScript: StakingDataPkScript
}

Logic creating output from data can be found here

Staking output description​

Staking output should commit to three scripts:

  • timelock_script
  • unbonding_script
  • slashing_script

Data needed to create staking_output:

  • staker_public_key - chosen by the user sending the staking transaction. It will be used in every script. This key needs to be put in the OP_RETURN output in the staking transaction.
  • finality_provider_public_key - chosen by the user sending the staking transaction. It will be used as <FinalityPk> in the slashing_script. In the lock-only network, there is no slashing, so this key has mostly informative purposes. This key needs to be put in the OP_RETURN output of the staking transaction.
  • staking_time - chosen by the user sending the staking transaction. It will be used as the locking time in the timelock_script. It must be a valid uint16 number, in the range global_parameters.min_staking_time <= staking_time <= global_parameters.max_staking_time. It needs to be put in the OP_RETURN output of the staking transaction.
  • covenant_committee_public_keys - it can be retrieved from global_parameters.covenant_pks. It is a set of covenant committee public keys which will be put in unbonding_script and slashing_script.
  • covenant_committee_quorum - it can be retrieved from global_parameters.covenant_quorum. It is the quorum of covenant committee members required to authorize spending using the unbonding_script or slashing_script.
  • staking_amount - chosen by the user, it will be placed in staking_output.value.
  • btc_network - the BTC network on which staking transactions will take place.

Building OP_RETURN and staking output implementation​

The Babylon staking library exposes the BuildV0IdentifiableStakingOutputsAndTx function with the following signature:

func BuildV0IdentifiableStakingOutputsAndTx(
	tag []byte,
	stakerKey *btcec.PublicKey,
	fpKey *btcec.PublicKey,
	covenantKeys []*btcec.PublicKey,
	covenantQuorum uint32,
	stakingTime uint16,
	stakingAmount btcutil.Amount,
	net *chaincfg.Params,
) (*IdentifiableStakingInfo, *wire.MsgTx, error)

It enables the caller to create valid outputs to put inside an unfunded and not-signed staking transaction.

The suggested way of creating and sending a staking transaction using bitcoind is:

  1. Create staker_key in the bitcoind wallet.
  2. Create unfunded and not signed staking transaction using the BuildV0IdentifiableStakingOutputsAndTx function.
  3. Serialize the unfunded and not signed staking transaction to staking_transaction_hex.
  4. Call bitcoin-cli fundrawtransaction "staking_transaction_hex" to retrieve funded_staking_transaction_hex. The bitcoind wallet will automatically choose unspent outputs to fund this transaction.
  5. Call bitcoin-cli signrawtransactionwithwallet "funded_staking_transaction_hex". This call will sign all inputs of the transaction and return signed_staking_transaction_hex.
  6. Call bitcoin-cli sendrawtransaction "signed_staking_transaction_hex".

Unbonding transaction​

The unbonding transaction allows the staker to on-demand unbond their locked Bitcoin stake prior to its original timelock expiration.

Requirements​

For the transaction to be considered a valid unbonding transaction, it must:

  • Have exactly one input and one output.
  • Input must be a valid staking output.
  • Output must be a Taproot output. This Taproot output must have disabled the key spending path, and committed to script tree composed of two scripts: the timelock script and the slashing script. This output is henceforth known as the unbonding_output.
  • Timelock in the timelock script must be equal to global_parameters.unbonding_time.
  • Value in the unbonding output must be equal to staking_output.value - global_parameters.unbonding_fee.

Building Unbonding output​

The Babylon Bitcoin staking library exposes the BuildUnbondingInfo function which builds a valid unbonding output. It has the following signature:

func BuildUnbondingInfo(
	stakerKey *btcec.PublicKey,
	fpKeys []*btcec.PublicKey,
	covenantKeys []*btcec.PublicKey,
	covenantQuorum uint32,
	unbondingTime uint16,
	unbondingAmount btcutil.Amount,
	net *chaincfg.Params,
) (*UnbondingInfo, error)

where:

  • stakerKey- must be the same key as the staker key in staking_transaction.
  • fpKeys - must contain one key, which is the same finality provider key used in staking_transaction.
  • covenantKeys- are the same covenant keys as used in staking_transaction.
  • covenantQuorum - is the same quorum as used in staking_transaction.
  • unbondingTime - is equal to global_parameters.unbonding_time.
  • unbondingAmount - is equal to staking_amount - global_parameters.unbonding_fee.

Spending Taproot outputs​

To create transactions which spend from Taproot outputs, either staking output or unbonding output, providing signatures satisfying the script is not enough.

The spender must also provide:

  • The whole script which is being spent.
  • The control block which contains: leaf version, internal public key, and proof of inclusion of the given script in the script tree.

Given that creating scripts is deterministic for given data, it is possible to avoid storing scripts by re-building scripts when the need arises.

Re-creating script and control block​

To build the script and control block necessary to spend from a staking output through the timelock script, the following function could be implemented.

import (
	// Babylon btc staking library
	"github.com/babylonlabs-io/babylon/btcstaking"
)

func buildTimelockScriptAndControlBlock(
	stakerKey *btcec.PublicKey,
	finalityProviderKey *btcec.PublicKey,
	covenantKeys []*btcec.PublicKey,
	covenantQuorum uint32,
	stakingTime uint16,
	stakingAmount btcutil.Amount,
	netParams *chaincfg.Params,
) ([]byte, []byte, error) {

	stakingInfo, err := btcstaking.BuildStakingInfo(
		stakerKey,
		[]*btcec.PublicKey{finalityProviderKey},
		covenantKeys,
		covenantQuorum,
		stakingTime,
		stakingAmount,
		netParams,
	)

	if err != nil {
		return nil, nil, err
	}

	si, err := stakingInfo.TimeLockPathSpendInfo()

	if err != nil {
		return nil, nil, err
	}

	scriptBytes := si.RevealedLeaf.Script

	controlBlock := si.ControlBlock

	controlBlockBytes, err := controlBlock.ToBytes()
	if err != nil {
		return nil, nil, err
	}

	return scriptBytes, controlBlockBytes, nil
}

The returned script and control block can be used to either build the witness directly or to put them in a PSBT which can be used by bitcoind to create the witness.

Creating PSBT to get signature for given Taproot path from Bitcoind​

To avoid creating signatures/witness manually, Bitcoind's walletprocesspsbt can be used. To use this Bitcoind endpoint to get signature/witness the wallet must maintain one of the keys used in the script.

Example of creating psbt to sign unbonding transaction using unbonding script from staking output:

import (
	"github.com/btcsuite/btcd/btcutil/psbt"
)

func BuildPsbtForSigningUnbondingTransaction(
	unbondingTx *wire.MsgTx,
	stakingOutput *wire.TxOut,
	stakerKey *btcec.PublicKey,
	spentLeaf *txscript.TapLeaf,
	controlBlockBytes []byte,
) (string, error) {
	psbtPacket, err := psbt.New(
		[]*wire.OutPoint{&unbondingTx.TxIn[0].PreviousOutPoint},
		unbondingTx.TxOut,
		unbondingTx.Version,
		unbondingTx.LockTime,
		[]uint32{unbondingTx.TxIn[0].Sequence},
	)

	if err != nil {
		return "", fmt.Errorf("failed to create PSBT packet with unbonding transaction: %w", err)
	}

	psbtPacket.Inputs[0].SighashType = txscript.SigHashDefault
	psbtPacket.Inputs[0].WitnessUtxo = stakingOutput
	psbtPacket.Inputs[0].Bip32Derivation = []*psbt.Bip32Derivation{
		{
			PubKey: stakerKey.SerializeCompressed(),
		},
	}

	psbtPacket.Inputs[0].TaprootLeafScript = []*psbt.TaprootTapLeafScript{
		{
			ControlBlock: controlBlockBytes,
			Script:       spentLeaf.Script,
			LeafVersion:  spentLeaf.LeafVersion,
		},
	}

	return psbtPacket.B64Encode()
}

Given that to spend through the unbonding script requires more than the staker's signature, the walletprocesspsbt endpoint will produce a new psbt with the staker signature attached.

In the case of a timelock path which requires only the staker's signature, walletprocesspsbt would produce the whole witness required to send the transaction to the BTC network.