Peer Protocol for PeerSwap Swaps

Introduction

The PeerSwap protocol describes on-chain to off-chain atomic swaps between direct Lightning peers. A swap consists of two on-chain transactions: a opening transaction and a spending transaction. The opening transaction can be spent by revealing a payment preimage, received by paying a Lightning invoice. The primary use case of PeerSwap is efficient balancing of Lightning channels.

The key words "MUST", "MUST NOT", "REQUIRED", "SHALL", "SHALL NOT", "SHOULD", "SHOULD NOT", "RECOMMENDED", "MAY", and "OPTIONAL" in this document are to be interpreted as described in RFC 2119.

Peer Protocol for PeerSwap Swaps

General

The protocol_version is included to allow for possible changes in the future. The protocol_version of this document is 5.

PeerSwap utilizes custom messages as described in BOLT#1. The types are in range 42069-42085. The payload is JSON encoded.

Both nodes MUST ignore unexpected Messages.
During a swap the involved peers MUST ensure, that there is only one active swap per channel.
Swaps are identified by a unique swap_id that MUST be mapped to the peers pubkey and MUST be checked on every message.

Supported Chains

Currently PeerSwap supports atomic swaps via the following chains, both main and testnets:

Bitcoin
Liquid Network

Terminology Guide

Initiator
- The peer requesting a swap.
Responder
- The peer participating in a swap requested by the Initiator.
Maker
- The peer that makes the on-chain commitment in the swap.
Taker
- The peer that pays the Lightning invoice in the swap.
Swap In
- A swap where the initiator is the maker, shifting Lightning balance towards itself.
Swap Out
- A swap where the initiator is the taker, shifting Lightning balance towards the Responder.

Swap In

Summary

                 Before                    Alice                     After
+-------+-------------------------------+ Swap In  +-------------------+-------------------+
|  0.2  |              0.8              | -------> |        0.5        |       0.5         |
+-------+-------------------------------+          +-------------------+-------------------+
 Alice                                Bob           Alice                                Bob

 0.5 btc                          0.5 btc           0.2 btc                          0.8 btc
 on-chain                         on-chain          on-chain                        on-chain

The aim of a Swap In is to shift the channel balance towards the initiators side. Therefore, the initiator asks its channel peer for a swap on the desired chain. If the peer agrees, the initiator publishes the opening transaction to the mempool and sends a Lightning invoice to the peer. Once the transaction has received enough confirmations, the responder pays the invoice and publishes the claim transaction, revealing the preimage of the invoice to claim the transaction output of the opening transaction.

The Swap

A swap in is initiated by the initiator (Alice) sending a swap_in_request message to the channel peer (Bob). Bob checks if the request is valid and if he can perform the swap. Bob then responds with the swap_in_agreement message. Alice then broadcasts the opening_transaction and sends the opening_tx_broadcasted message with an invoice back to Bob. After the opening_transaction is confirmed, Bob pays the invoice and can then broadcast the claim_transaction with the preimage to send the on-chain funds of the swap to an address of his desire.

Negotiation

This phase of the swap is used to agree on the swap conditions.

The `swap_in_request` message

type: 42069
payload json encoded:

{
  protocol_version: uint64,
  swap_id: string,
  asset: string,
  network: string,
  scid: string,
  amount: uint64,
  pubkey: string
}

protocol_version is the version of the PeerSwap peer protocol the sending node uses.

swap_id is a randomly generated 32 byte string that must be kept the same through the whole process of a swap and serves as an identifier for a specific swap.

asset is the desired on-chain asset to use. This can be:

Bitcoin: The field is left blank.
Liquid: The asset id of the networks Bitcoin asset.

network is the desired on-chain network to use. This can be:

Bitcoin: mainnet, testnet, signet, regtest
Liquid: The field is left blank as the asset id also identifies the network.

scid is the short channel id in human readable format, defined by BOLT#7 with x as separator, i.e. 539268x845x1.

amount is the amount in Sats that is asked for.

pubkey is a 33 byte compressed public key generated by the swap initiator. It is used for the spending paths in the opening_transaction.

Requirements

The sending node (swap maker/initiator):

MUST set the protocol_version to the version the implementation it is using.
MUST ensure the swap_id is unique from any other swap the node has participated in.
If requesting a swap using the Liquid chain:
- MUST leave the network field blank.
- MUST set the asset field to the asset id of the networks Bitcoin asset.
otherwise requesting a swap using the Bitcoin chain:
- MUST set the network field to the network the bitcoin node operates on, one of mainnet, testnet, regtest.
- MUST leave the asset field blank.
MUST set amount greater than 0 and smaller than or equal to the channel size.
SHOULD ensure that it can spend the asked amount on the desired network and asset from the on-chain wallet.
MUST set the scid in desired format for an existing channel between the peers.
SHOULD use a fresh random private key to generate the pubkey per swap request.
MUST set a 33 byte sized pubkey for the receiving node to build the swap bitcoin script in order to verify the broadcasted opening transaction.
SHOULD fail the swap after a reasonable time without receiving an answer.

The receiving node (swap taker/responder):

MUST fail the swap on an incompatible protocol_version.
MUST fail_the_swap if the swap_id is already used
MUST fail_the_swap if both or neither asset and network are set.
if asset is set:
- MUST fail the swap if it does not support the asked asset.
if network is set:
- MUST fail the swap if it does not support the asked network.
MUST fail the swap if the amount exceeds channel size.
MUST fail the swap if the channel with scid does not exist to the peer.
MUST keep the swap_in_request message field values for later use.

The `swap_in_agreement` message

type: 42073
payload json encoded:

{
  protocol_version: uint64,
  swap_id: string,
  pubkey: string,
  premium: int64
}

protocol_version is the version of the PeerSwap peer protocol the sending node uses.

swap_id is the unique identifier of the swap.

pubkey is a 33 byte compressed public key generated by the swap responder. It is used for the spending paths in the opening_transaction.

premium is a compensation in Sats that the swap partner wants to be paid in order to participate in the swap.

Requirements

The sending node (swap taker/responder):

MUST set the swap_id to the swap_id received from the swap_in_request message.
MUST set a 33 byte sized pubkey for the maker node to build the bitcoin script for the opening transaction.
SHOULD use a fresh random private key to generate the pubkey.
SHOULD fail the swap after a reasonable time without receiving an answer.
SHOULD set premium to the desired compensation in Sats.

The receiving node (swap maker/initiator):

MUST fail the swap on an incompatible protocol_version.
MUST ignore the message if the swap id is unknown.
MUST keep the pubkey for later use in the case of a failing swap.
if the premium exceeds its expectations:
- MUST fail_the_swap
otherwise:
- MUST add the premium to the on-chain amount of the opening_transaction.

The next steps are the same for both kind of swaps and are laid out under Doing the Swap.

Swap Out

Summary

                 Before                    Alice                     After
+-------------------------------+-------+ Swap Out +-------------------+-------------------+
|              0.8              |  0.2  | -------> |        0.5        |       0.5         |
+-------------------------------+-------+          +-------------------+-------------------+
 Alice                                Bob           Alice                                Bob

 0.5 btc                          0.5 btc           0.8 btc                          0.2 btc
 on-chain                         on-chain          on-chain                        on-chain

The aim of a Swap Out is to shift the channel balance towards the responders side. Therefore, the initiator asks its channel peer for a swap on the desired chain. If the responder agrees, it responds with a fee invoice to cover the on-chain fees for claiming the on-chain funds, in case the initiator does not pay the later swap invoice. When the initiator pays the fee invoice, the responder broadcasts the opening transaction to the mempool and sends a Lightning invoice to the initiator. Once the transaction has enough confirmations, the initiator pays the invoice and creates the claim transaction with the preimage.

The Swap

Negotiation

This phase of the swap is used to agree on the swap conditions. It involves one more invoice than the swap in negotiation, to compensate for the on-chain fees the swap responder and maker in this case has to account for.

The `swap_out_request` message

type: 42071
payload json encoded:

{
  protocol_version: uint64,
  swap_id: string,
  asset: string,
  network: string,
  scid: string,
  amount: uint64,
  pubkey: string
}

protocol_version is the version of the PeerSwap peer protocol the sending node uses.

swap_id is a randomly generated 32 byte string, that must be kept the same through the whole process of a swap and serves as an identifier for a specific swap.

asset is the desired on-chain asset to use. This can be:

Bitcoin: The field is left blank.
Liquid: The bitcoin asset hash of the desired network.

network is the desired on-chain network to use. This can be:

Bitcoin: mainnet, testnet, signet, regtest
Liquid: The field is left blank as the asset id also defines the network.

scid is the short channel id in human readable format, defined by BOLT#7 with x as separator, i.e. 539268x845x1.

amount is the amount in satoshi that is asked for.

pubkey is a 33 byte compressed public key generated by the initiator. It is used for the spending paths in the opening_transaction.

Requirements

The sending node (swap taker/initiator):

MUST set the protocol_version to the version the implementation it is using.
MUST ensure the swap_id is unique from any other swap the node has participated in.
If requesting a swap using the Liquid chain:
- MUST leave the network field blank.
- MUST set the asset field to the asset id of the networks Bitcoin asset.
otherwise requesting a swap using the Bitcoin chain:
- MUST set the network field to the network the bitcoin node operates on, one of mainnet, testnet, regtest, signet.
- MUST leave the asset field blank.
MUST set amount greater than 0 and smaller than or equal to the capacity of the channel.
MUST set the scid in desired format for an existing channel between the peers.
SHOULD use a fresh random private key to generate the pubkey per swap request.
MUST set a 33 byte sized compressed pubkey for the receiving node to build the swap bitcoin script in order to verify the broadcasted opening transaction.
SHOULD fail the swap after a reasonable time without receiving an answer.

The receiving node (swap responder):

MUST fail the swap on an incompatible protocol_version.
MUST fail_the_swap if the swap_id is already used.
MUST fail_the_swap if both or neither asset and network are set.
if asset is set:
- MUST fail the swap if it does not support the asked asset.
if network is set:
- MUST fail the swap if it does not support the asked network.
MUST fail the swap if the amount exceeds channel size.
MUST ensure that it can dispose the asked amount on the desired network and asset.
MUST fail the swap if the channel with scid does not exist to the peer.
MUST keep the swap_out_request message field values for later use.

The `swap_out_agreement` message

type: 42075
payload json encoded:

{
  protocol_version: uint64,
  swap_id: string,
  pubkey: string,
  payreq: string,
  premium: uint64
}

protocol_version is the version of the PeerSwap peer protocol the sending node uses.

swap_id is the unique identifier of the swap.

pubkey is a 33 byte compressed public key generated by the responder. It is used by the initiator to build the bitcoin script in order to verify the opening_transaction.

payreq is a BOLT#11 invoice with an amount that covers the fee expenses for the on-chain transactions.

premium is a compensation in Sats that the swap partner wants to be paid in order to participate in the swap.

Requirements

The sending node (swap maker/responder):

MUST set the protocol_version to the version the implementation is using.
MUST set the swap_id to the swap_id received from the swap_out_request message.
SHOULD use a fresh random private key to generate the pubkey.
MUST set a 33 byte sized pubkey for the taker node to build the swap bitcoin script for verification of the opening transaction.
MUST set payreq to a valid BOLT#11 invoice
SHOULD set the amount of the invoice to the fee of the to be created opening_transaction.
SHOULD resend the message periodically until one of the following is true:
- fee invoice with payreq has been paid.
- fee invoice with payreq expired, in this case MUST fail the swap.
- received a cancel or coop_close message.
SHOULD set premium to the desired compensation in Sats.
if the premium is set:
- MUST add premium on payreq of opening_tx_broadcasted message.

The receiving node (swap initiator):

MUST fail the swap on an incompatible protocol_version.
MUST ignore the message if the swap_id is unknown.
MUST fail the swap if payreq is not a valid BOLT#11 invoice;
SHOULD fail the swap if the amount asked for in the payreq is exceeding own expectations.
MUST fail the swap if the amount asked for in the payreq added to the amount asked for in the swap_out_request exceeds the peers channel balance.
MUST try to pay the fee invoice and fail the swap if this fails.
if the premium exceeds its expectations:
- MUST fail_the_swap

When the fee invoice was paid, the next steps are the same for both kind of swaps and are laid out under Doing the Swap.

Doing the Swap

After the peers agreed to the swap conditions, the swap maker broadcasts the opening_transaction and sends the opening_tx_broadcasted message to the swap taker.

The `opening_tx_broadcasted` message

type: 42077
payload json encoded:

{
  swap_id: string,
  payreq: string,
  tx_id: string,
  script_out: uint64,
  blinding_key: string,
}

swap_id is the unique identifier of the swap.

payreq is the invoice as described in BOLT#11 that the responder is requested to pay.

tx_id is the transaction id of the opening_transaction broadcasted by the initiator.

script_out is the transaction output that contains the opening_transaction output script for the swap.

blinding_key:

Bitcoin: Blank.
Liquid Network: Is the 32 byte blinding key to un-blind the outputs of the opening_transaction.

Requirements

The sending node (swap maker):

MUST set swap_id matching the ongoing swap.
MUST set payreq to a valid BOLT#11 invoice with the amount that was requested in amount of the swap request and the payment_hash of the opening_transaction and a reasonable expiry.
MUST set tx_id to the id of the broadcasted opening_transaction.
MUST set script_out to the output index that contains the script for the opening_transaction
if asset was set in the request:
- MUST set the blinding_key to the blinding key that is used to blind the opening_transaction outputs.
otherwise:
- MUST NOT set the blinding_key.
SHOULD fail any htlc that would change the channel into a state, where the swap invoice can not be paid until the swap invoice was paid.
SHOULD resend the message until one of the following is true:
- swap invoice with payreq has been paid.
- swap invoice with payreq expired, in this case MUST fail the swap.
- received a cancel or coop_close message.
if the invoice with payreq gets paid:
- MUST consider the swap finished and ignore all future messages with swap_id.
otherwise after the invoice is expired:
- MUST fail the swap.

The receiving node (swap taker):

MUST fail the swap if the swap_id changed.
MUST check that the payreq amount matches the negotiated amount of the swap and fail the swap if not.
SHOULD fail any htlc that would change the channel into a state, where the swap invoice can not be paid until the swap invoice was paid.
MUST wait for the opening_transaction with tx_id to be confirmed.
MUST verify the opening_transaction output with index script_out:
- if asset was set in the request:
  - MUST un-blind the amount with the blinding_key
- MUST check that the amount matches the negotiated amount of the swap.
- MUST check that the script is built as described by opening_transaction.
if this fails:
- MUST fail the swap.
otherwise:
- MUST pay the swap invoice over the channel with the negotiated scid.
  - if this fails:
    - SHOULD retry to pay the invoice, but MUST NOT pay the invoice if current block height exceeds CONFIRMATION_HEIGHT + R/2, where CONFIRMATION_HEIGHT is the height of the block at which the opening_transaction counts as confirmed, and R is the relative locktime of the claim_by_csv path of the opening_transaction.
    - if this fails:
      - MUST fail the swap.
  - otherwise:
    - MUST broadcast the claim_by_preimageclaim_transaction with a fee high enough to ensure that the transaction is confirmed before the claim_by_csv spending path is possible.
    - MUST consider the swap finished after the claim_transaction has been confirmed.

Failing a Swap

When a node cancels a swap, the most effective way should be used to avoid unnecessary long on-chain locks for the swap partner. This means that if the swap fails after the opening_transaction was broadcasted (e.g. because the invoice can not be paid), the swap taker should be cooperative and fail the swap via the coop_close message.

Both nodes MUST expect cancel and coop_close at any time during an active swap.

Messages

The `cancel` message

type: 42079
payload json encoded:

{
  swap_id: string,
  message: string,
}

swap_id is the unique identifier of the swap.

message is a hint to why the swap was canceled.

Requirements

The sending node:

MUST set swap_id matching the ongoing swap.
SHOULD set a meaningful message.
MUST consider the swap canceled and ignore all future messages with swap_id.
if it is the swap maker and the opening_transaction was already broadcasted:
- MUST broadcast the claim_transaction, with the claim_by_csv spending path, after the CSV has passed.
- MUST allow for new swaps on the channel as soon as the claim_transaction is confirmed.
otherwise:
- MUST allow for new swaps on the channel.

The receiving node:

MUST consider the swap canceled and ignore all future messages with swap_id.
if it is the swap maker and the opening_transaction was already broadcasted:
- MUST broadcast the claim_transaction, with the claim_by_csv spending path, after the CSV has passed.
- MUST allow for new swaps on the channel as soon as the claim_transaction is confirmed.
otherwise:
- MUST allow for new swaps on the channel.

The `coop_close` message

type: 42081
payload json encoded:

{
  swap_id: string,
  message: string,
  privkey: string,
}

swap_id is the unique identifier of the swap.

message is a hint to why the swap was closed cooperatively.

privkey is the private key to the pubkey that is used to build the opening_transaction.

Requirements

The sending node (swap taker):

MUST set swap_id matching the ongoing swap.
SHOULD set a meaningful message.
if the node is the initiator:
- MUST set privkey to the random private key that was used to generate the pubkey that was set in the request message.
otherwise:
- MUST set privkey to the random private key that was used to generate the pubkey that was set in the agreement message.

The receiving node (swap maker):

if the opening_transaction was already broadcasted:
- MUST consider the swap canceled and ignore all future messages with swap_id.
- MUST broadcast the claim_transaction with the claim_by_coop spending path using the privkey.
- if this fails:
  - MUST broadcast the claim_transaction with the claim_by_csv spending path, after the CSV has passed.
otherwise:
- MUST consider this to be a cancel message.

Transactions

CSV Times and Confirmations

Timings are critical to the PeerSwap protocol. The goal is to provide a safe swap while maintaining a reasonable time frame. The timings differ for the supported networks.

In the case of Bitcoin:

CSV = 1008
Min required confirmations for the opening_transaction = 3

In The case of Liquid:

CSV = 60
Min required confirmations for the opening_transaction = 2

The difference in timings is due to the different fee and consensus models of the Liquid Network and Bitcoin.

Timeouts and Invoice expiry

The expiry of the swap invoice MUST be less than or equal to half the CSV time to ensure a secure swap.

Opening Transaction

The opening transaction has a pay-to-witness-script-hash^BIP141 (P2WSH) output that locks the on-chain part of the swap. This script has three different spending paths. These are the claim_by_invoice, claim_by_csv and the claim_by_coop paths. The transaction maker may use inputs to his desire.

If this is a Liquid transaction, it MUST be blinded.

Opening Transaction Output

The opening transaction policy:

or(and(pk(A),or(pk(B),sha256(H))),and(pk(B),older(144)))

The opening transaction output script is a P2WSH:

<B> OP_CHECKSIG OP_NOTIF
  <B> OP_CHECKSIG OP_NOTIF
    OP_SIZE <20> OP_EQUALVERIFY OP_SHA256 <H> OP_EQUALVERIFY
  OP_ENDIF
  <A> OP_CHECKSIG
OP_ELSE
  <N> OP_CHECKSEQUENCEVERIFY
OP_ENDIF

With:

<A> the pubkey of the taker
<B> the pubkey of the maker
<H> the payment_hash
<N> the number of confirmations before the refund to the maker is possible. See CSV Times

Claim transaction

The claim transaction finishes the atomic swap. There are three different variants for the claiming transaction, depending on how the swap finishes.

The `claim_by_invoice` path

This is the desired way to finish a swap. The taker sends the funds to its address by revealing the preimage of the swap invoice.

txin count: 1
- txin[0] outpoint: tx_id and script_output from the opening_tx_broadcasted message
- txin[0] sequence: 0
- txin[0] script bytes: 0
- txin[0] witness: <signature_for_A> <preimage> <> <> <redeem_script>

The `claim_by_coop` path

This is the way to cooperatively finish a swap. The maker refunds to its address without waiting for the CSV.

txin count: 1
- txin[0] outpoint: tx_id and script_output from the opening_tx_broadcasted message
- txin[0] sequence: 0
- txin[0] script bytes: 0
- txin[0] witness: <signature_for_A> <signature_for_B> <> <redeem_script>

The `claim_by_csv` path

This is the way to finish a swap if the invoice was not paid and the taker did not send a coop_close message. After the relative locktime has passed, the maker refunds to them.

txin count: 1
- txin[0] outpoint: tx_id and script_output from the opening_tx_broadcasted message
- txin[0] sequence:
  - for btc as asset: 0x3F0 corresponding to the CSV of 1008
  - for lbtc as asset: 0x3C corresponding to the CSV of 60
- txin[0] script bytes: 0
- txin[0] witness: <signature_for_B> <redeem_script>

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Peer Protocol for PeerSwap Swaps

Introduction

Table of Contents

General

Supported Chains

Terminology Guide

Initiator

Responder

Maker

Taker

Swap In

Swap Out

Swap In

Summary

The Swap

Negotiation

The swap_in_request message

Requirements

The swap_in_agreement message

Requirements

Swap Out

Summary

The Swap

Negotiation

The swap_out_request message

Requirements

The swap_out_agreement message

Requirements

Doing the Swap

The opening_tx_broadcasted message

Requirements

Failing a Swap

Messages

The cancel message

Requirements

The coop_close message

Requirements

Transactions

CSV Times and Confirmations

Timeouts and Invoice expiry

Opening Transaction

Opening Transaction Output

Claim transaction

The claim_by_invoice path

The claim_by_coop path

The claim_by_csv path

The `swap_in_request` message

The `swap_in_agreement` message

The `swap_out_request` message

The `swap_out_agreement` message

The `opening_tx_broadcasted` message

The `cancel` message

The `coop_close` message

The `claim_by_invoice` path

The `claim_by_coop` path

The `claim_by_csv` path