Bitcoin smart contract platform RSK announced its new “Powpeg” – a new and improved version that includes many decentralized qualities that protect private keys stored in special-purpose PowHSMs.
The hopes are that Bitcoin proponents will turn to it as a primary choice of DeFi. The 2-way peg protocol brings interesting features, worth having a look at.
What is Powpeg?
RSK’s 2-way peg protocol also referred to as the “Powpeg” has managed to mature substantially since its inception back in 2018 and includes a range of decentralized qualities. It has been running uninterrupted since 2018 but it has also evolved.
It’s based on a layered security model – this is a practice called “defense-in-depth.” The solution differs from other 2-way peg protocols used by various teams. Most of them rely on a single cryptographic protocol that resolves the multi-party custody problem in a rather intricate way.
These protocols are delicate and only a small array of entities can properly audit them. Oftentimes when they are compromised, this results in a sudden loss of security for the users. Most of them also focus on taking advantage of high collateralization when it comes to a new token.
The RSK Powpeg, on the other hand, claims to rely on multiple defenses spread on different layers, each one of which is relatively simple to understand and test.
This is what has allowed RSK to grow to its current state without a lot of problems or downtime. Members of the Powpeg are incentivized to participate by receiving a small amount of the RSK transaction fees because there is no collateralization.
The diagram below depicts the RSK Powpeg protocol as a system and how it relates to blockchain consensus.
Now, Powpeg Functionaries participating in it keep specialized hardware called PowHSMs that’s active and connected to special types of RSK full nodes, also referred to as the Powpeg Node. This is basically an external and tamper-proof device that protects and creates one of the private keys required for the multisig Bitcoin protocol.
On the other hand, a large portion of Bitcoin miners who participate in RSK merge-mining also provide the persistence and the liveness of the blockchain properties which are required for the security of the RSK network. Their role is the most crucial layer of the aforementioned “defense-in-depth” approach.
Other entities who interact with RSK’s 2-way peg by sending and receiving penguin and peg-out transactions are the economic actors. They also utilize the bridge, which is a precompiled smart contract that lives in RSK’s blockchain. Its role is to maintain a relevant view of the Bitcoin blockchain, as well as to verify peg-in requests and to command peg-outs.
What About Security?
The team claims that the RSK peg is quickly becoming among the most secure multi-signature systems out there.
The security of Powpeg relies on several strategies – defense-in-depth, coordination transparency, as well as public attestation. The first is realized by carefully separating responsibilities. This means that compromising the system would require more than just compromising a single component or an actor. For instance, miners, functionaries, PowHSM manufacturers, or developers can’t steal funds of the peg on their own because it’s governed by a set of consensus rules that are enforced in the software and each on of them protects the other from vulnerabilities and bugs.
The coordination transparency suggests that all communications between functionaries take place over RSK’s blockchain. There aren’t any hidden messages or a pre-established system that allows actors to communicate in secrecy.
Last but not least the firmware attestation means that the full nodes and the Powpeg nodes are generated with deterministic builds. However, currently, the firmware installation of the PowHSMs can’t be entirely trust-free since it requires a group of auditors to attest to the correctness of the installation. The team is working on this with a new layer of defense where the next version of PowHSM’s firmware will be capable of providing firmware attestation using security features entirely provided by the device.
RSK’s peg has matured quite a bit from a federation to the current Powpeg. As it continues to grow, more bitcoins are expected to be moved into RSK, while it should also keep improving and provide additional security to the users.