I have updated my article on Bitcoin and CTV Covenants.

Here's the updated section for The Enigma Network, but please read the full article, it's still a living document as the community provides feedback on this emergent behavior that naturally forms out of Covenants similar to The Lightning Network being an emergent behavior of Channels. The idea is that your actual transactions are no longer on-chain, you create anchor transactions that lets you toss your old STXO's and make new STXO's. So now you can perform hops, and each time you land, you redraw the map for what you want to do for your jump. Because you can in a single tx, close all channels with your partners, reopen them in a "cold" status so that a watchtower isnt needed and you can reveal them as needed, make them as adjustable as needed so you can provide better liquidity between channels. The concern for STXO's is not tamperability as if you tweak them at all, they are no longer valid inputs for ATXOs, but data loss. If you lose your STXOs and no one else has them, your money might be gone. One thing you could do is in an ATXO, close all channels, and reopen them cold, then make a backup with lnscirbe.

Now your data and money is safe. Enjoy!

But what if I could avoid paying fees to unroll my UTXO and transaction? Welcome to The Enigma Network. This new Network is deterministic, on-chain, has automatic UTXO pooling with asynchronous payments, and as collaboration increases, both scaling and privacy increases. Let’s set out some terms first. Anchor UTXO’s will be called ATXO’s, normal transactions, such as opening or closing channels, paying Bob, anything that doesn’t need to go on-chain, these UTXO’s are the transactions placed inside ATXO’s and we will call them Settlement UTXO’s, STXO’s. UTXOs that are short-lived, private with e-cash-like properties are Virtual UTXO’s, VTXO’s. The idea is that only ATXO’s go on-chain, STXO’s and VTXO’s are freely traded between users, without needing the mempool and can be done non-interactively with privacy. STXO’s are incorruptible when they are committed so they are only good as in input for making a PSBT for an ATXO. Losing your STXO’s can result in a loss of funds.

So what layer is this Settlement Layer? Could be Layer 0.5 or maybe Layer 1.5. As all of the data that has to be retained is Settlement data, I’m calling it the Settlement Layer. If I commit a transaction that has 1 GB worth of data inside its transaction, I’ve made the Settlement Layer 1 GB bigger and if I unroll these STXO’s onto the main chain, the Settlement Layer would shrink while the main chain would grow, but I would have to pay the fees to unroll all of that data. All transactions in the Settlement Layer are committed, cannot be modified and are as trustworthy as being inside a block on the main chain, that’s the entire intent. This Settlement Layer could grow to trillions of bytes of data and that wouldn’t be an issue as the data is safe, ready to be used, held by the owners of that data. In fact, the more we push things to the Settlement Layer and not on the main chain, the more efficient we can consolidate onto the main chain.

Consider a scenario where Alice needs to pay Bob in the future but is also expecting to receive another payment soon. Instead of creating a separate child transaction and submitting it to the mempool, along with associated fees, Alice can incorporate an STXO for Bob within her next payment she is receiving. By doing so, Alice commits the payment to Bob and can provide the signed STXO to him directly, without relying on the regular transaction process. Similarly, Bob can follow the same approach when he receives a payment on-chain and creates a PSBT STXO from Alice's STXO to pay Carol. When Bob received payment from someone’s ATXO₁, both his ATXO₀ and the new ATXO₁ will be the inputs to the transaction, Carol’s payment will be hidden inside the new output ATXO₂ without any evidence that Bob’s payment went to Carol. And anyone who was not part of the collaboration in the transaction, will be ejected as output UTXO’s. These could be entire pools or single individuals, depending on the circumstances. Perhaps Carol ejects her UTXO in the next transaction. This chain of transactions can extend indefinitely, while the original ATXO does not appear to change ownership. It is important to highlight that all these transactions are processed outside the regular transaction flow, allowing participants to commit them without adding to the blockspace. STXO’s never go on-chain unless they’re needed for visibility or perhaps as an inscription. As a result, additional fees are avoided, and block capacity is optimized. An interesting implication is that any channel openings, channel closings, or other transactions can be discarded once they have been spent, eliminating the need for them to be included on the blockchain.