doc: uxtreeo

Author: liamzebedee

docs/idea-uxtreeo.md

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+Idea: UXTO
+==========
+
+The state of a Bitcoin blockchain is the UXTO set - the set of unspent transaction outputs. Each UXTO is a "one-use" piece of state - a transaction consumes inputs (UXTO's) and sends their value to different outputs (which is where UXTO's are created).
+
+There are two implications to this model:
+
+ 1. Nodes must store an entire UXTO set.
+ 2. In an account-based model, nodes must check for transaction uniqueness via account nonces.
+
+Here is an idea for simplifying this:
+
+ 1. Each block commits to a sparse merkle tree containing the state.
+ 2. The state consists of UXTO's which are identified by key and value.
+ 3. It is simple for light clients to verify the validity of a UXTO based on the current state of this tree, since sparse merkle trees allow for inclusion/exclusion proofs.
+ 4. But this incurs a large cost - in order to spend a UXTO, users must produce a leaf proof - which is O(N log N) leaves in space. This times 8192 txs (the full size of a 2MB block?) means quite a lot more data storage. Each hash is 32 bytes, so at least 16*32 is a lot of bytes added.
+ 5. So - what we can do. Nodes can prove these leaves into a ZK proof - thus reducing the cost down to O(log N) where N is the number of computational steps - and close to constant size if proof aggregation is used.
+
+https://eprint.iacr.org/2019/611
+
+https://bitcoinops.org/en/topics/utreexo/