Bitcoin Covenants

Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 9604)


This paper presents an extension to Bitcoin’s script language enabling covenants, a primitive that allows transactions to restrict how the value they transfer is used in the future. Covenants expand the set of financial instruments expressible in Bitcoin, and enable new powerful and novel use cases. We illustrate two novel security constructs built using covenants.

The first, vaults, focuses on improving the security of private cryptographic keys. Historically, maintaining these keys securely and reliably has been a critical vulnerability for Bitcoin users. We show how covenants enable vaults, which disincentivize key theft by preventing an attacker from gaining full access to stolen funds.

The second construct, poison transactions, is a generally useful mechanism for penalizing double-spending attacks. Bitcoin-NG, a protocol that has been recently proposed to improve Bitcoin’s throughput, latency and overall scalability, requires this feature. We show how covenants enable poison transactions, and detail how Bitcoin-NG can be implemented progressively as an overlay on top of the Bitcoin blockchain.


Script Language Consensus Protocol Standard Block Logical Location Script Program 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



The authors thank Glenn Willen for useful conversations, Tim Ruffing and Dominique Schröder for their advice on cryptographic primitives, and the anonymous reviewers for their valuable feedback.

This material is based upon work supported by a fellowship within the FITweltweit programme of the German Academic Exchange Service (DAAD), the German Bundesministerium für Bildung und Forschung (BMBF) under grant agreement No. 13N13505, and the National Science Foundation under Grant No. CNS-1518779 and Grant No. CNS-1561209. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the funding organizations.


  1. 1.
    Back, A., Corallo, M., Dashjr, L., Friedenbach, M., Maxwell, G., Miller, A., Poelstra, A., Timón, J., Wuille, P.: Enabling Blockchain Innovations with Pegged Sidechains. Accessed 03 Nov 2015
  2. 2.
    #Bitcoin-Wizard IRC log. Accessed 28 Oct 2015
  3. 3.
  4. 4.
    Bonneau, J., Miller, A., Clark, J., Narayanan, A., Kroll, J.A., Felten, E.W.: Research perspectives on bitcoin and second-generation cryptocurrencies. In: IEEE Symposium on Security and Privacy. IEEE, San Jose (2015)Google Scholar
  5. 5.
    Bos, J.W., Halderman, J.A., Heninger, N., Moore, J., Naehrig, M., Wustrow, E.: Elliptic curve cryptography in practice. In: Christin, N., Safavi-Naini, R. (eds.) FC 2014. LNCS, vol. 8437, pp. 156–174. Springer, Heidelberg (2014)Google Scholar
  6. 6.
    BtcDrak, Friedenbach, M., Lombrozo, E.: BIP 112: CHECKSEQUENCEVERIFY (2015). Accessed 08 Oct 2015
  7. 7.
    Buterin, V.: A Next Generation Smart Contract and Decentralized Application Platform (2013). Accessed Feb 2015
  8. 8.
    Buterin, V.: Slasher: A Punitive Proof-of-Stake Algorithm, January 2015.
  9. 9.
    Chaum, D., Fiat, A., Naor, M.: Untraceable electronic cash. In: Goldwasser, S. (ed.) CRYPTO 1988. LNCS, vol. 403, pp. 319–327. Springer, Heidelberg (1990)Google Scholar
  10. 10.
    Coastermonger: Thief’s downfall covenant. Accessed 16 Sept 2013
  11. 11.
    Colored Coins Project. Colored Coins. Accessed Sept 2015
  12. 12.
    d’aniel, Todd, P.: Security deposits (2013). Accessed 20 Aug 2013
  13. 13.
    Decker, C.: [bitcoin-dev] [BIP] Normalized transaction IDs. Accessed 03 Nov 2015
  14. 14.
    Dogecoin Project. Dogecoin. Accessed Nov 2014
  15. 15.
    Eskandari, S., Barrera, D., Stobert, E., Clark, J.: A first look at the usability of bitcoin key management. In: NDSS Workshop on Usable Security (USEC) (2015)Google Scholar
  16. 16.
    Eyal, I., Gencer, A.E., Sirer, E.G., van Renesse, R.: Bitcoin-NG: a scalable blockchain protocol. In: Proceedings of the 6th USENIX Symposium on Networked Systems Design and Implementation, NSDI 16–18, 2016, Santa Clara, CA, USA, March 2016Google Scholar
  17. 17.
    Goldfeder, S., Gennaro, R., Kalodner, H., Bonneau, J., Kroll, J.A., Felten, E.W., Narayanan, A.: Securing Bitcoin Wallets Via a New DSA/ECDSA Threshold Signature Scheme (2015)Google Scholar
  18. 18.
    Hankerson, D., Menezes, A., Vanstone, S.: Guide to Elliptic Curve Cryptography (2004)Google Scholar
  19. 19.
    Higgins, S.: Bitstamp Claims $5 Million Lost in Hot Wallet Hack (2015). Accessed 16 Oct 2015
  20. 20.
    List of Major Bitcoin Heists, Thefts, Hacks, Scams, Losses. Accessed 16 Oct 2015
  21. 21.
    Litecoin Project. Litecoin, open source P2P digital currency. Accessed Nov 2014
  22. 22.
    Maxwell, G.: CoinCovenants Using SCIP Signatures, an Amusingly Bad Idea. Accessed 25 Oct 2015
  23. 23.
    Nakamoto, S., Bitcoin: A Peer-to-Peer Electronic Cash System (2008).
  24. 24.
    Ruffing, T., Kate, A., Schröder, D.: Liar, liar, coins on fire! — penalizing equivocation by loss of bitcoins. In: Proceedings of the 22nd Conference on Computer and Communications Security, CCS 2015, Denver, CO, USA. ACM, New York (2015)Google Scholar
  25. 25.
    Todd, P.: BIP 65: OP_CHECKLOCKTIMEVERIFY (2014). Accessed 08 Oct 2015
  26. 26.
    Tschorsch, F., Scheuermann, B.: Bitcoin and Beyond: A Technical Survey on Decentralized Digital Currencies. Cryptology ePrint Archive. Report 2015/464 (2015)Google Scholar
  27. 27.
    Vishnumurthy, V., Chandrakumar, S., Sirer, E.G.: Karma: a secure economic framework for peer-to-peer resource sharing. In: Workshop on the Economics of Peer-to-Peer Systems, Berkeley, California, vol. 35 (2003)Google Scholar

Copyright information

© International Financial Cryptography Association 2016

Authors and Affiliations

  1. 1.Department of Information SystemsUniversity of MünsterMünsterGermany
  2. 2.Initiative for Cryptocurrencies and Contracts (IC3), Computer Science DepartmentCornell UniversityIthacaUSA

Personalised recommendations