mflaxman/blind-xpub

A bitcoin proposal for how to blind xpub(s) such that possession of a given seed phrase reveals nothing about what it protects.

Blinding A Seed Using Secret BIP32 Paths

Table of Contents

• Intro
• Walk-through
  • Generate 2 Seed Phrases
  • Blind 1 Seed Phrase
  • Create Output Descriptors (Account Map)
  • Get Receive Address
  • Sign Transaction
  • What We Accomplished
• Compatibility
• Blinding Multiple Seeds
• Seed Phrase Reuse
• Comparison to Other Protocols
• Backing Up Output Descriptors
• References

Intro

Bitcoin's multisig security model is a breakthrough in human ability to self-custody value. By comparison, it is impossible to 3-of-5 your gold. Multisig adoption has the power to reduce hacks/theft/loss in the bitcoin space by allowing HODLers to make 1 (or more) catastrophic errors in their custody without putting any funds at risk.

However, multisig currently suffers from a new problem: protecting your funds with m-of-n (i.e. 2-of-3) seeds means that there are now n locations where your privacy could be at risk.

Privacy Leakage

Standard/default BIP32 path usage makes it so that if a bad actor gets unauthorized access to a BIP39 seed phrase, they can scan the blockchain for witness/redeem scripts in transaction inputs to learn about what funds that seed protects. For example, they might learn the following:

• The stolen seed phrase was party to a massive bitcoin transaction yesterday. Note that this is the case even if this seed phrase did not produce a signature in the transaction and was just sitting in deep cold storage.
• The transaction appears to have had a large change output sent back to itself, so this seed phrase is likely still actively being used to protect (at least) that much bitcoin.
• The transaction was a 2-of-3 of type p2wsh, so only 1 more seed phrase (along with the output descriptors) is needed to spend funds.
• This wallet engages in similar transactions each Friday at ~4pm local time.

Even if the direct outcome of this privacy leak isn't used to rob someone, this information can be used in other nefarious ways:

• A government could subpoena a bank to look inside a safe deposit box to find a BIP39 seed phrase (say on a metal plate).
• A collaborative custodian (e.g. a lawyer, accountant, heir, close friend, "uncle Jim" bitcoiner, collaborative custody service, etc) could learn about your HODL and could share that information (by being hacked, a business decision, or being compelled by government).
• An eager heir could peak at their future inheritance.

Solution

In this scheme, we demonstrate using a large and randomly generated BIP32 path to blind a BIP39 seed (or more specifically the corresponding xpub) in a multisig quorum. If a bad actor gets unauthorized access to that BIP39 seed (and passphrase, if applicable), they learn nothing about what it protects. This scheme enables 1 (or more) semi-trusted collaborative custodians to hold an emergency recovery key in your multisig quorum with zero knowledge of what they're protecting, which can make it far easier to achieve geographic, jurisdictional, and/or organizational diversity.

This scheme is already live on bitcoin mainnet, is compatible with existing multisig hardware wallets and Coordinator softwares (see compatibility), and has positive implications for privacy, recovery, and trust-minimized collaborative key-holders.

Walk-through

For this demo, we'll use Specter-Desktop (powered by Bitcoin Core) as it's used by the vast majority of new sovereign multisig users. This should work out of the box for any Coordinator software that supports modern multisig standards (output descriptors and PSBTs). We'll also duplicate the code in buidl as it's a no-dependency FOSS bitcoin implementation that provides full support for every step of the blinding protocol. For simplicity, we are going to blind just 1 seed phrase in a 1-of-2, but it should be obvious how to expand this to a 2-of-3, 3-of-5, or any other quorum. At the end, we'll discuss implications for blinding all n seed phrases.

Buidl Setup for Verification (not required)

Easiest way to install and verify it's working:

$ pip3 install buidl && python3
>>> from buidl import *

More secure way

Because buidl has no dependencies and is designed for airgap use, you don't actually need to install it:

$ git clone https://github.com/buidl-bitcoin/buidl-python.git && cd buidl-python && python3
>>> from buidl import *

These verification steps can be performed with other open-source libraries, so we'll call out to them below as well.

Generate 2 Seed Phrases

Let’s assume that seed phrase A is held by (and generated by) me and seed B is held by (and generated by) a trusted-minimized third party (e.g. a lawyer, accountant, heir, close friend, "uncle Jim" bitcoiner, collaborative custody service, etc) for emergency recovery only.

Seed Phrase A

BIP39 Seed Phrase (invest repeated 12x):
invest invest invest invest invest invest invest invest invest invest invest invest

Public Key Record (from hardware wallet):
[aa917e75/48h/1h/0h/2h]tpubDEZRP2dRKoGRJnR9zn6EoLouYKbYyjFsxywgG7wMQwCDVkwNvoLhcX1rTQipYajmTAF82kJoKDiNCgD4wUPahACE7n1trMSm7QS8B3S1fdy

Seed Phrase B

BIP39 Seed Phrase (sell repeated x12):
sell sell sell sell sell sell sell sell sell sell sell sell

Public Key Record (from hardware wallet):
[2553c4b8/48h/1h/0h/2h]tpubDEiNuxUt4pKjKk7khdv9jfcS92R1WQD6Z3dwjyMFrYj2iMrYbk3xB5kjg6kL4P8SoWsQHpd378RCTrM7fsw4chnJKhE2kfbfc4BCPkVh6g9

If you didn't know, these are valid seed phrases (though highly insecure).

buidl verification

This could be generated in buidl as follows:

$ python3
>>> from buidl.hd import HDPrivateKey
>>> HDPrivateKey.from_mnemonic("invest " * 12, network="testnet").generate_p2wsh_key_record()
'[aa917e75/48h/1h/0h/2h]tpubDEZRP2dRKoGRJnR9zn6EoLouYKbYyjFsxywgG7wMQwCDVkwNvoLhcX1rTQipYajmTAF82kJoKDiNCgD4wUPahACE7n1trMSm7QS8B3S1fdy'
>>> HDPrivateKey.from_mnemonic("sell " * 12, network="testnet").generate_p2wsh_key_record()
'[2553c4b8/48h/1h/0h/2h]tpubDEiNuxUt4pKjKk7khdv9jfcS92R1WQD6Z3dwjyMFrYj2iMrYbk3xB5kjg6kL4P8SoWsQHpd378RCTrM7fsw4chnJKhE2kfbfc4BCPkVh6g9'

We ignore SLIP132 version byte encoding, but if your Coordinator software requires it then pass use_slip132_version_byte=True into generate_p2wsh_key_record() or use Jameson Lopp's convenient xpub converter.

Blind 1 Seed Phrase

Remember that Seed Phrase B is held by our trust-minimized third party.

We blind seed B's xpub using buidl's built in multiwallet.py. We use the default entropy setting for a depth of 4 in our BIP32 path, or (2^31)^4 ≈ 124 bits. This should make brute-forcing impossible.

Text version

Here is the full text from running this tool, unfortunately I didn't save the original screenshot:

$ python3 multiwallet.py 
Welcome to multiwallet, the stateless multisig bitcoin wallet.
This tool is free and there is NO WARRANTY OF ANY KIND.
You are currently in SAFE mode.
Type help or ? to list commands.

(₿) advanced_mode
ADVANCED mode set, don't mess up!
(₿) blind_xpub
Enter an xpub key record to blind in the format [deadbeef/path]xpub (any path will do): [2553c4b8/48h/1h/0h/2h]tpubDEiNuxUt4pKjKk7khdv9jfcS92R1WQD6Z3dwjyMFrYj2iMrYbk3xB5kjg6kL4P8SoWsQHpd378RCTrM7fsw4chnJKhE2kfbfc4BCPkVh6g9
Use standard entropy parameters for blinding? [Y/n]: 
Generating BIP32 path with 124 bits of good entropy...
Here is a blinded xpub key record to upload to your Coordinator.
Create a multisig wallet with this blinded xpub and it will become a part of your account map (output descriptors).

[2553c4b8/48h/1h/0h/2h/2046266013/1945465733/1801020214/1402692941]tpubDNVvpMhdGTmQg1AT6muju2eUWPXWWAtUSyc1EQ2MxJ2s97fMqFZQbpzQM4gU8bwzfFM7KBpSXRJ5v2Wu8sY2GF5ZpXm3qy8GLArZZNM1Wru

Important notes:
  - Do NOT share this record with the holder of the seed phrase, or they will be able to unblind their key (potentially leaking privacy info about what it controls).
  - Possession of this blinded xpub key record has privacy implications, but it CANNOT alone be used to sign bitcoin transactions.
  - Possession of the original seed phrase (used to create the original xpub key record), CANNOT alone be used to sign bitcoin transactions.
  - In order to spend from this blinded xpub, you must have BOTH the seed phrase AND the blinded xpub key record (which will be included in your account map before you can receive funds).

Ian Coleman BIP39 Verification

You can validate on this on an airgap computer using Ian Coleman’s popular open-source tool.

Derivation path from xpub:

Derivation path from seed phrase:

Create Output Descriptors

In our case, we take the regular seed phrase A xpub (see Seed Phrase A above) and the blinded Seed Phrase B xpub we just calculated (see Blind 1 Seed Phrase above) and combine them into a 1-of-2 p2wsh sortedmulti output descriptor using Bitcoin Core (via Specter-Desktop):

That will also generate a backup of the output descriptors in pdf, json, and as a QR code.

buidl verification

We run the following code in python:

from buidl.descriptor import P2WSHSortedMulti

quorum_m = 1
key_records = [
    {
        # investx12 - regular path
        "xfp": "aa917e75",
        "path": "m/48h/1h/0h/2h",
        "xpub_parent": "tpubDEZRP2dRKoGRJnR9zn6EoLouYKbYyjFsxywgG7wMQwCDVkwNvoLhcX1rTQipYajmTAF82kJoKDiNCgD4wUPahACE7n1trMSm7QS8B3S1fdy",
        "account_index": 0,
    },
    {
        # sellx12 - BLINDED path
        "xfp": "2553c4b8",
        "path": "m/48h/1h/0h/2h/2046266013/1945465733/1801020214/1402692941",
        "xpub_parent": "tpubDNVvpMhdGTmQg1AT6muju2eUWPXWWAtUSyc1EQ2MxJ2s97fMqFZQbpzQM4gU8bwzfFM7KBpSXRJ5v2Wu8sY2GF5ZpXm3qy8GLArZZNM1Wru",
        "account_index": 0,
    },
]
p2wsh_sortedmulti_obj = P2WSHSortedMulti(quorum_m, key_records)
print(p2wsh_sortedmulti_obj)

Results:

wsh(sortedmulti(1,[aa917e75/48h/1h/0h/2h]tpubDEZRP2dRKoGRJnR9zn6EoLouYKbYyjFsxywgG7wMQwCDVkwNvoLhcX1rTQipYajmTAF82kJoKDiNCgD4wUPahACE7n1trMSm7QS8B3S1fdy/0/*,[2553c4b8/48h/1h/0h/2h/2046266013/1945465733/1801020214/1402692941]tpubDNVvpMhdGTmQg1AT6muju2eUWPXWWAtUSyc1EQ2MxJ2s97fMqFZQbpzQM4gU8bwzfFM7KBpSXRJ5v2Wu8sY2GF5ZpXm3qy8GLArZZNM1Wru/0/*))#0lfdttke

Get Receive Address

Specter-Desktop

Bitcoin Core (via Specter-Desktop), provides the following address:

buidl verification

>>> p2wsh_sortedmulti_obj.get_address(0)
'tb1q6d6frh07dl8djmnv48aqelp6r0mejzh7qgauw7yx5qcjehvcfnsqxc6lly'

Caravan verification

You can generate watch-only addresses with Caravan using this wallet configuration file (derived from the output descriptors generated above):

Sparrow verification

You can generate watch-only addresses with Sparrow using the output descriptors (the thing starting with wsh(sortedmulti(..., see Create Output Descriptors above):

Receive Bitcoin

Using a testnet faucet, we send some tBTC to this address: https://blockstream.info/testnet/tx/67eed0727a639f214b3da3ee206b2a27ed8cd8aca6ccd795972da5bc33dc4d35

Sign Transaction

To spend from this multisig, both of the following are required:

1. One seed phrase - can be either A or B
2. The complete output descriptors - this covers all seeds used in this multisig wallet, even if they're not used to co-sign the given transaction

We will return the funds to the testnet faucet address:

mkHS9ne12qx9pS9VojpwU5xtRd4T7X7ZUt

Prepare Transaction

Bitcoin Core (via Specter-Desktop) creates an unsigned PSBT to sweep these funds:

The corresponding PSBT it displays is (image version for airgap signers here):

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

Caravan

If you designate the transaction as a "Coldcard", Caravan can interact with buidl (because Caravan's Coldcard implementation under-the-hood is regular PSBT).

Then, you can generate the transaction to sign using multiwallet (text or screenshot) and relay this to your bitcoin node:

Sign Using Blinded Key

This can also be performed on Specter-DIY, or using any other PSBT-native hardware wallet that doesn't restrict which BIP32 paths their customers can use.

Text version

$ python3 multiwallet.py 
Welcome to multiwallet, the stateless multisig bitcoin wallet.
This tool is free and there is NO WARRANTY OF ANY KIND.
You are currently in SAFE mode.
Type help or ? to list commands.

(₿) send
Paste in your account map (AKA output record): wsh(sortedmulti(1,[aa917e75/48h/1h/0h/2h]tpubDEZRP2dRKoGRJnR9zn6EoLouYKbYyjFsxywgG7wMQwCDVkwNvoLhcX1rTQipYajmTAF82kJoKDiNCgD4wUPahACE7n1trMSm7QS8B3S1fdy/0/*,[2553c4b8/48h/1h/0h/2h/2046266013/1945465733/1801020214/1402692941]tpubDNVvpMhdGTmQg1AT6muju2eUWPXWWAtUSyc1EQ2MxJ2s97fMqFZQbpzQM4gU8bwzfFM7KBpSXRJ5v2Wu8sY2GF5ZpXm3qy8GLArZZNM1Wru/0/*))#0lfdttke
Paste partially signed bitcoin transaction (PSBT) in base64 form: 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
Transaction appears to be a testnet transaction. Display as testnet? [Y/n]: 
PSBT sends 99,877 sats to mkHS9ne12qx9pS9VojpwU5xtRd4T7X7ZUt with a fee of 123 sats (0.12% of spend)
In Depth Transaction View? [y/N]: 
Sign this transaction? [Y/n]: 
Enter your full BIP39 seed phrase: sell sell sell sell sell sell sell sell sell sell sell sell
Use a passphrase (advanced users only)? [y/N]: 

Signed PSBT to broadcast:

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

This transaction was then broadcast on the testnet blockchain here: https://blockstream.info/testnet/tx/1ae50b064c72ab0d71207693814519016755a89444f3d42ea4d32dad3b307536

Sign Using Regular Key

This is standard, so we will only demonstrate it quickly with multiwallet.py. You could use any good multisig hardware wallet with the BIP39 seed phrase invest invest invest... (x12).

Text version

$ python3 multiwallet.py 
Welcome to multiwallet, the stateless multisig bitcoin wallet.
This tool is free and there is NO WARRANTY OF ANY KIND.
You are currently in SAFE mode.
Type help or ? to list commands.

(₿) send
Paste in your account map (AKA output record): wsh(sortedmulti(1,[aa917e75/48h/1h/0h/2h]tpubDEZRP2dRKoGRJnR9zn6EoLouYKbYyjFsxywgG7wMQwCDVkwNvoLhcX1rTQipYajmTAF82kJoKDiNCgD4wUPahACE7n1trMSm7QS8B3S1fdy/0/*,[2553c4b8/48h/1h/0h/2h/2046266013/1945465733/1801020214/1402692941]tpubDNVvpMhdGTmQg1AT6muju2eUWPXWWAtUSyc1EQ2MxJ2s97fMqFZQbpzQM4gU8bwzfFM7KBpSXRJ5v2Wu8sY2GF5ZpXm3qy8GLArZZNM1Wru/0/*))#0lfdttke
Paste partially signed bitcoin transaction (PSBT) in base64 form: 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
Transaction appears to be a testnet transaction. Display as testnet? [Y/n]: 
PSBT sends 99,877 sats to mkHS9ne12qx9pS9VojpwU5xtRd4T7X7ZUt with a fee of 123 sats (0.12% of spend)
In Depth Transaction View? [y/N]: 
Sign this transaction? [Y/n]: 
Enter your full BIP39 seed phrase: invest invest invest invest invest invest invest invest invest invest invest invest
Use a passphrase (advanced users only)? [y/N]: 

Signed PSBT to broadcast:

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

What We Accomplished

At the time of seed generation up until revealing the output descriptors (with secret BIP32 path), the holder of seed phrase B was unable to learn anything about what they were protecting:

• Transaction history (including any spent UTXOs) & balance
• Quorum information (1-of-2 in this case)

If the HODLer of this seed phrase were malicious (or compelled by a government), they would not be able to reveal any privacy information. Also, because this is built on top of existing BIP32 path standards, it is already compatible with many existing Hardware Wallets and Coordinator libraries (see compatibility).

Of course, this scheme requires that the blinded key holder be able to get access to the output descriptors in the event they are needed for recovery. Presumably, revealing this privacy information is well worth it to the original key-holder:

• If the original key-holder is still alive but has lost access to m seed phrases, this allows them to recover their otherwise-lost bitcoin.
• If the original key-holder is now deceased, privacy is likely no longer their top concern (they just want the funds to make it to their heirs).

A common use-case here might be a 2-of-3 with the following criteria:

• Seed A belongs to the HODLer, who keeps it at home or work (along with copies of the output descriptors)
• Seed B belongs to the HODLer, who intentionally blinds it before putting the seed phrase in a safe deposit box. The safe deposit box is setup to automatically transfer to the HODLer's estate (children) in the event something happens to them.
• Seed C is generated by the HODLer's estate (children), who is also given a copy of the output descriptors.

In this situation, if a banker drills the safe deposit box and gets access to Seed B, they would be unable to tell what they gained access to (amount and/or quorum).

Of course this is just one construction out of nearly infinite possibilities. Some other popular constructions include:

• Blind the heir's key (so that they don't know what they're inheriting) and give the output descriptors to a lawyer (who is bound by attorney-client privilege and also has no private key material).
• Have a trusted family friend who understands how to use a hardware wallet hold 1 blinded key (perhaps if the children are too young to be hold their own seeds). The family friend cannot see what they're protecting, as the output descriptors must live with a lawyer and/or in a safe deposit box.

Compatibility

What's amazing about this protocol is that because it takes advantage of existing standards (BIP32 and output descriptors) it already works on the bitcoin network! Adding support is usually a matter of just eliminating restrictions on BIP32 paths, not adding any new functionality.

Signers

Name	Type	Display Addresses	Sign Standard Path	Sign Blinded Path
Specter-DIY	Hardware	✅	✅	✅
Sparrow	Software	✅	✅	✅
multiwallet.py	Software	✅	✅	✅
Keystone	Hardware	✅	✅	❌
BitBox02	Hardware	✅	✅	❌
Passport	Hardware	✅	✅	✅
Coldcard	Hardware	⚠️	⚠️	⚠️
Trezor	Hardware	❔	❔	❔
Fully Noded	Software	✅	❔	❔

Under regular use, Coldcard cannot import enhanced-privacy multisig wallets for address validation, nor co-sign a transaction using regular/unblinded paths (unless you disable essential safety checks: Settings > Multisig Wallets > Skip Checks).

Coordinator Software

Name	Display Addresses	Generate PSBT to Sign
Specter-Desktop	✅	✅
Caravan	✅	✅
Sparrow	✅	✅
Fully Noded	✅	❔

Note: to use Caravan for TX signing with PSBTs you must designate each Signer as a "Coldcard", since under-the-hood that is just the PSBT standard.

Blinding Multiple Seeds

In the previous example, we were able to blind 1 xpub without trusting the hardware wallet and/or person generating the seed phrase to not peak/save the BIP32 path. However, the same scheme could be applied to every seed phrase in our own quorum.

This means that if a bad actor gets unauthorized access to a single seed phrase (perhaps a single secure location is compromised), they learn nothing about what it protects nor what threshold is required for access.

Note, that we don't have to choose between blinding 1 and blinding all seeds, it is possible to mix and match. Once users grok the blinding scheme they are likely to want to blind all of their seeds, but in case of limited hardware wallet support may choose for now to blind only those seeds that are kept in less-secure locations or with parties for whom privacy is a bigger issue (e.g. not a collaborative custody service that already knows your output descriptors anyway).

Seed Phrase Reuse

It's important to note that in the case of using a trust-minimized third-party, that third-party could reuse the same seed phrase in nearly infinite trust-minimized setups. To put this in practical terms, an "Uncle-Jim bitcoiner" might give out the same xpub to dozens of friends/family members who wish to include Uncle Jim in their multisig quorum for emergency recovery, while preserving privacy.

Since each blinded xpub has its own BIP32 path that is collision-resistant by design, there is theoretically no privacy leakage. To be safe, the best practice might be for Uncle Jim to give out a different xpub to each recipient.

It would even be possible (though not required) for this seed phrase to be the very same one Uncle Jim uses to protect their personal bitcoin, meaning no new setup ceremony nor backups would be required for Uncle Jim to start help protect their friends' multisig wallets. Relying more heavily on one system might further incentivize Uncle Jim to improve his own seed phrase security, perhaps by using a better entropy source, a more durable metal plate backup, potentially including a passphrase, and/or using a protocol like SLIP39.

Emergency/Recovery Keys

Multisig's killer feature (adding redundancy and eliminating single points of failure) is heavily reduced if private key material is stored in the same physical location. For example, a 2-of-3 multisig where 2 seed phrases are kept at home is problematic. While 4-of-7 multisig sounds great in theory, how many people have access to 7 locations with around the clock security? The problem is even harder if you want geographic redundancy to protect against natural disasters (a fire, flood, or tornado leading to evacuation).

By using this scheme, you can choose to delegate some trust to explicit third parties by giving them keys designed to only ever be used for emergency recovery. Under normal circumstances, they never sign a transaction nor even see your output descriptors. In an emergency recovery situation (you lose 1 or more seeds and/or are hit by a bus), these collaborative custodians can co-sign if they are supplied the output descriptors. Losing some privacy only if it leads to recovery of your otherwise lost bitcoin is a compelling proposition for many bitcoiners.

Backing Up Output Descriptors

Backing up output descriptors is a new problem that multisig introduces, regardless of whether this privacy scheme is used. Most new users don't realize that spending from a multisig wallet requires more than just access to m-of-n seed phrases; you must also have the static output descriptors (extended public key information) for all n seeds. This means that if a user stores their funds in a 3-of-5 multisig wallet and loses only 1 seed (meaning that they still have access to the other 4 seed phrases), in order to spend the associated funds they must still also have a copy of their output descriptors.

Under current best practices (regular/unblinded seeds), multisig output descriptors can easily be regenerated from all n seed phrases, but it is impossible to regenerate output descriptors from n-1 seed phrases. For this reason, backups of output descriptors are already essential!

There are two problems with these backups:

1. It reveals all of your transaction history to anyone who comes across it.
2. It is generally far too large to etch into metal (and would be difficult to transcribe).

Deterministic Paths

Astute readers may notice a new problem introduced by this proposal: if you blind 1 or more xpubs and lose your output descriptors (yet still had access to all n seeds), you would be unable to regenerate the output descriptors needed to access your funds. This is not the case with regular/unblinded paths, where recovery of all n seeds is sufficient to deterministically regenerate your output descriptors.

Current best practices are to backup your output descriptors with each seed, but let's assume that a HODLer doesn't do that, or over a long enough time perhaps the digital media and/or paper they used failed. One creative idea from @stepansnigirev is to feed data from the public key records into a pseudo-random function and use that output to encode BIP32 paths. Because the algorithm is deterministic, it would be possible to use that data to regenerate the output descriptors with all n seeds.

A simple version of the deterministic algorithm for a 2-of-3 might be something like:

hash_digest = sha256("2 xpub_A xpub_B xpub_C")
bip32_path = deterministic_path_from_entropy(hash_digest)

See here for a more complex working version that includes some more advanced features:

1. Lexicographic sorting of xpubs (not just sortedmulti at the child pubkey level, but sorting the parent xpubs to always produce the same PRF input)
2. Ability to easily recover BIP32 paths (and thus full output descriptors) even if you forget your quorum threshold (m) and/or which of your xpubs you blinded.
3. Deterministically unique and unlinkable BIP32 paths for each blinded xpub, so that publishing a BIP32 path for 1 xpub does not leak any info to other xpubs.
4. An optional user-passphrase feature, which feeds extra entropy into the PRF, creating unlimited decoy multisig wallets (experts only and disabled by default).

Note that just like regular/unblinded multisig commonly used today, if you lose your output descriptors and have n-1 seeds (say 4-of-5 seeds in a 3-of-5 multisig) that is still not sufficient to regenerate your output descriptors. Deterministic BIP32 paths is only useful if you have all n seed phrases but lost your output descriptors.

SSSS for Output Descriptors

Regardless of whether this blinding proposal is implemented widely (with or without the above deterministic paths), Shamir's Secret Sharing scheme for output descriptors would be a welcome addition to multisig standards as well.

For example, assume:

1. HODLer encrypts the output descriptors, and uses Shamir's Secret Sharing Scheme to divide the decryption key used into 2-of-n parts (arbitrary but useful threshold).
2. Each of n secure locations has: 1 unique seed phrase (perhaps etched in metal), 1 unique Shamir Share (see previous step), and a copy of the same encrypted output descriptors payload.

Note that the encrypted output descriptors could be kept redundantly in many less secure locations (perhaps even cloud storage), as 2 shamir shares are needed to decrypt the output descriptors (and it alone cannot be used to spend funds).

Then, as long as you are able to access 2 secure locations, you can recover your full output descriptors. It would then be possible to have something like a 3-of-5 on-chain p2wsh multisig, where 2-of-5 Shamir Shares are needed to recover the decryption key and use it to decrypt the output descriptors.

If that were to happen it would be very good for existing multisig setups, and also it would work excellently with these secret BIP32 paths.

Comparison to Other Protocols

How does this compare to existing options?

Regular/Traditional/Unblinded Seeds

While this protocol provides strong privacy guarantees, is it worth it? Regular (unblinded) seeds have some advantages:

• Complexity is the enemy of security. Counterpoint: the biggest form of complexity is backup up the output descriptors, which is already the best practice for multisig and solves this problem.
• Greater hardware wallet support. Counterpoint: I hope all hardware wallets will support enhanced privacy in the future, but for now it's easy to add enhanced privacy only to seeds whose hardware wallets allow it.
• If you don't keep a copy of the output descriptors, but still have all n seed phrases, you can still recover your funds. Counterpoint: you should never lose your output descriptors, as they should be backed up in many places. Update: the deterministic paths version of this protocol eliminates this concern!

Secret BIP39 Passphrases

Another way to accomplish the same goal would be to use a unique passphrase for each BIP39 seed and not store that passphrase with the BIP39 seed (keep it stored somewhere else). I argue that using BIP32 paths is strictly superior.

• Most hardware wallets have bad input devices (no keyboard), so typing a long passphrases at setup/use is quite challenging. The passphrase is also required to "unlock" the HWW, vs just using an existing mechanism (output descriptors) to transfer unlocking data to the HWW. In this case of QR-based wallets, this unlocking is currently a magical UX; all you need to do is scan the Output Descriptors once and your hardware wallet is ready to go.
• These unique passphrases must be stored somewhere. Of course, this could just be at the Coordinator, but there is currently no mechanism/standard for how to do that (unlike BIP32 paths).
• Requires visiting cold storage for re-use. For an "Uncle Jim" bitcoiner to participate in many different friends or family member multisig wallets, he must visit his cold storage and enter a unique passphrase before giving out an xpub to each participant.
• If you want to use a regular BIP39 passphrase in addition to a blinding passphrase, that becomes complex. You would probably just do something like append the regular passphrase to the end of the blinding passphrase, but this is messy (was there a separation character?).
• Humans are terrible at generating passphrases. While it would always be possible to have good software generate the passphrase, that would be confusing as passwords are typically user-supplied.
• From the author of the original passphrase-based proposal: "I like your privacy proposal (using long unpredictable BIP32 path) better than mine (using BIP39 passwords)."

Taproot

This article is a good starting point to learn more about how multisig with taproot might be coordinated in the future.

Taproot offers compelling privacy, transaction fee, input validation, and complex script template advantages. That said, if past upgrades are any indication, vendor adoption is going to take a very long time. This is even more true for multisig, which still has limited support from hardware wallets (and tends to get the least updates/attention).

Because taproot allows for much larger scripts (while keeping fees affordable), we could see a big increase in the number of co-signers/locations used for script-path spends. For example, you could have:

• A multisig that degrades from a 4-of-7 to 3-of-7 to 2-of-7, and finally to 1-of-7, with each degradation taking place every 5 years.
• Combinations where different seeds hold different weighting: 2 of your own seeds are needed to spend funds, but alternatively 3 of your family's seeds can be used, or 4 of your friends' seeds.

Taproot also uses output descriptors to describe addresses, so you're facing a very similar privacy problem if you store output descriptors with each seed phrase (recommended) and 1 of your secure locations is compromised. As taproot is designed to be compatible with ECDSA private keys (and thus BIP39), this same scheme should play nicely with future taproot multisig standards as they emerge.

Taproot has the nice advantage that script path spends only leak information about keys that were used to sign the transaction (other keys in deep cold storage that are still part of the quorum leak no information). Taproot alone might be sufficient for blinded 3rd party seed phrases, where a trust-minimized recovery-key holder must be given output descriptors to cosign (after privacy with them is lost). However, taproot offers no benefit for first-party key-holders who want to blind their own seed phrases before putting them in a secure location.

Shamir's Secret Sharing Scheme

While Shamir's Secret Sharing Scheme with single sig is strictly inferior to multisig from a security perspective, it does have the benefit that if someone gains access to <m shamir shares they learn nothing about what those Shamir Shares protect.

Multisig security benefits aside, the potential privacy loss that multisig introduces is completely eliminated when using this proposal!

References

• Blockchain commons thread on nosy signatories
• Original tweet-storm with the idea for this

Thank you to Stepan Snigirev, Clark Moody, Jimmy Song, Christopher Allen, Buck Perley, SeedSigner, and others for providing me with feedback on various iterations of this proposal. More feedback is welcomed.