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Spark

Overview
Status
Beta
Type
Statechain
Fee Token
BTC
BTC Supply
Unavailable
Spark is an implementation of the statechain protocol where users interact with a statechain entity to process transfers for offchain representations of UTXOs. Spark's statechain implementation leverages a federation of operators to act as the statechain entity.
CUSTODY
DATA AVAILABILITY
OPERATORS
FINALITY ASSURANCE
Risk Summary
Users trust the statechain entity with key deletion
If the statechain entity does not delete the keyshare it held with the previous owner, they can collude and immediately spend funds. This effectively results in the current owner's funds being stolen.
Unilateral exits not live during beta release
This implementation does not support unilateral exits. If the statechain entity becomes unresponsive, users funds are frozen.
Previous owner can broadcast their unilateral exit transaction
If the previous owner broadcasts their unilateral exit transaction, the current owner must respond by broadcasting theirs with a sooner expiring timelock. If the current owner does not respond, the previous owner can steal funds.
Trust Assumption Review
BTC Custody
Low
Users collaboratively custody funds with the statechain entity
Users custody funds collectively with the statechain entity in a 2-2 multisig. When funds are transferred, users trust the statechain entity to delete the keyshare it held with the previous owner so it cannot collectively spend funds with past owners.
Data Availability
Low
Data related to current UTXO ownership is held client-side
Transaction data is self-hosted. The statechain entity signs individual transactions and users store data for their keyshare and unilateral exit path client-side.

The statechain entity also keeps a record of transfer history.
Network Operators
Very High
🛑
Offchain transfers are co-signed by a federation
Offchain UTXO transfers are co-signed by the user and a federation of operators. Users trust this federation for liveness and ensuring the system remains operational.

Spark currently has two members in its statechain entity; Lightspark and Flashnet.
Finality Guarantees
Very High
🛑
Users trust a federation to delete keyshares held with previous owners
Finality is provided by the statechain entity deleting the keyshare that it held with the previous owner. This implementation's statechain entity is comprised of a federation of signers where a certain threshold is needed to co-sign transfers.

If the entity does not delete the keyshare, then it can collude with a previous owner and double spend the new owner. There is no way to prove that the entity deleted its previous keyshare. Users are unable to have any finality assurances in this set up.
Bitcoin Security
Users rely on Bitcoin network participants for exit transactions
The protocol enables users to unilaterally exit. Users only need to interact with the bitcoin network to exit the protocol.
The protocol does not enable MEV on Bitcoin
Due to transaction sequencing being offchain, the protocol does not enable MEV on the Layer 1.
No alternative token needed for network security
The protocol does not need another token for transaction fees or other use cases.
Unilateral exits contribute to the security budget
Statechains do not interact with the base layer outside of uses unilaterally exiting with their funds. Unilateral exit transactions pay L1 transaction fees.
Technology
Statechains
Statechains are offchain protocols where users custody an L1 UTXO collaboratively with a statechain entity. Users transfer funds by sending their private key to a new recipient with a decrementing timelock. Statechain entities are expected delete its previous keyshare with previous owners and only interact with the current holder of the keyshare.

If the statechain entity interacts with a previous owner, then they can double spend the current owner. And if a previous owner broadcasts its unilateral exit transaction, then the current owner must broadcast their own to ensure ownership of funds (due to the current owner's timelocks expiring before previous owners).
FROST
FROST (Flexible Round-Optimized Schnorr Threshold Signatures) is a protocol that minimizes the number of rounds of communication between participants in Schnorr signature schemes, reducing network bandwidth, time, and probability of errors. It can be used to implement 'n-of-m' threshold signatures represented by a single signature on the blockchain. This saves block space and increases privacy by making them indistinguishable from other, more common spend types.

Spark leverages FROST for its statechain entity. A threshold of statechain operators are needed to create a valid signature for signing events.
Use Cases
Offchain UTXO transfers
Users can transfer virtual representations of UTXOs offchain with the assistance of an operator. These transfers have fast, soft confirmation times and are lower in fees than L1 Bitcoin transactions.
Tokenized applications
The protocol can be used to improve the efficiency of UTXO-based token protocols. Users are able to transfer and trade tokenized UTXOs with faster confirmation times than Bitcoin L1 with trust tradeoffs.

Tokenized applications may include stablecoin transfers or token exchange protocols.
Knowledge Bits
Learn more about statechains below