zips/zip-0320.rst

::

  ZIP: 320
  Title: Defining an Address Type to which funds can only be sent from Transparent Addresses
  Owners: Daira Emma Hopwood <daira@electriccoin.co>
          Kris Nuttycombe <kris@nutty.land>
  Credits: Hanh
  Status: Draft
  Category: Standards / Wallet
  Created: 2024-01-12
  License: MIT
  Discussions-To: <https://github.com/zcash/zips/issues/757>
  Pull-Request: <https://github.com/zcash/zips/pull/760>

Terminology
===========

The key words "MUST", "MUST NOT", "SHOULD", and "MAY" in this document are
to be interpreted as described in BCP 14 [#BCP14]_ when, and only when, they
appear in all capitals.

The terms below are to be interpreted as follows:

Recipient
  A wallet or other software that can receive transfers of assets (such
  as ZEC) or in the future potentially other transaction-based state changes.
Producer
  A wallet or other software that can create an Address (in which case it is
  normally also a Recipient) or a Viewing Key.
Consumer
  A wallet or other software that can make use of an Address or Viewing Key
  that it is given.
Sender
  A wallet or other software that can send transfers of assets, or other
  consensus state side-effects defined in future. Senders are a subset of
  Consumers.
  
Abstract
========

This ZIP defines a new encoding for transparent Zcash addresses. Wallets must
ensure that no shielded notes are spent in transactions that send to a
transparent address encoded in the specified fashion.

This ZIP is presently in Draft status, and defines two alternate encodings for
consideration. Analysis of the benefits and drawbacks of each of the proposed
alternatives is presented at the end of this document.

Background
==========

In November of 2023, the Zcash community received notice from the Binance
cryptocurrency exchange that Zcash was at risk of being delisted from the
exchange unless the community could provide a mechanism by which Binance could
refuse deposits from shielded addresses and return them to the depositor. This
issue was raised and discussed at length in the Zcash Community forum
[#binance-delisting]_.

In the course of that discussion thread, wallet developer and community member
@hanh [#hanh-profile]_ suggested a wallet-oriented approach [#hanh-suggestion]_
that involved defining a new encoding for Zcash transparent P2PKH addresses. A
Consumer of such an address, whether it be a wallet or an exchange, could
recognize this encoding as a directive that the wallet should only spend
transparent funds when creating an output to that address.

Motivation
==========

The Binance cryptocurrency exchange requires that funds sent to their deposit
addresses come from source addresses that are readily identifiable using
on-chain information, such that if necessary funds may be rejected by sending
them back to the source address(es). This ZIP is intended to standardize a
transparent address encoding that is not yet understood by preexisting
Consumers, in order to prevent inadvertent shielded spends when sending to such
addresses. Then, Consumers that upgrade to support the new encoding will do so
with the understanding that they must respect the restrictions on sources of
funds described in this ZIP.

Requirements
============

1. A Recipient wishing to receive funds from exclusively transparent sources
   must be able to generate a receiving address such that only transparent
   funds will be spent in transactions with an output to this address.
2. Wallets and other Consumers that have not been upgraded to recognize the new
   address format cannot mistake the address for another address type or
   inadvertently send shielded funds to the address.
3. No changes to Recipient infrastructure beyond changes to address encoding
   and decoding should be required as a consequence of this ZIP.

Alternative 1
=============

This alternative was suggested by @hanh in [#hanh-suggestion]_.

TEX Addresses
-------------

A TEX Address is a ``bech32m`` reencoding of a transparent Zcash P2PKH address
[#protocol-transparentaddrencoding]_.

Motivations for Alternative 1
-----------------------------

The TEX Address is the simplest possible approach to creating a new address
type that indicates that only transparent sources of funds should be used.

Specification (Alternative 1)
-----------------------------

A TEX address is produced from a mainnet Zcash P2PKH Address by executing the
following steps:

1. Decode the address to a byte array using the Base58Check decoding
   algorithm [#Base58Check]_.
2. If the length of the resulting byte sequence is not 22 bytes or if its two-byte
   address prefix is not :math:`\mathtt{[0x1C, 0xB8]}`, return an error. Otherwise,
   let the **validating key hash** be the remaining 20 bytes of the array after
   removing the two-byte address prefix.
3. Reencode the 20-byte **validating key hash** using the Bech32m encoding
   defined in [#bip-0350]_ with the human-readable prefix (HRP) ``"tex"``.

For testnet addresses, the required lead bytes of a P2PKH address in step 2
are :math:`\mathtt{[0x1C, 0xB8]}`, and the ``"textest"`` HRP is used when
reencoding in step 3.

Wallets and other Senders sending to a TEX address MUST ensure that only
transparent UTXOs are spent in the creation of a transaction.

Reference Implementation (Alternative 1)
----------------------------------------

Javascript::

   import bs58check from 'bs58check'
   import {bech32m} from 'bech32'
   
   // From t1 to tex
   var b58decoded = bs58check.decode('t1VmmGiyjVNeCjxDZzg7vZmd99WyzVby9yC')
   console.assert(b58decoded.length == 22, 'Invalid length');
   console.assert(b58decoded[0] == 0x1C && b58decoded[1] == 0xB8, 'Invalid address prefix');
   var pkh = b58decoded.slice(2)
   var tex = bech32m.encode('tex', bech32m.toWords(pkh))
   console.log(tex)
   
   // From tex to t1
   var bech32decoded = bech32m.decode('tex1s2rt77ggv6q989lr49rkgzmh5slsksa9khdgte')
   console.assert(bech32decoded.prefix == 'tex', 'Invalid address prefix')
   var pkh2 = Uint8Array.from(bech32m.fromWords(bech32decoded.words))
   console.assert(pkh2.length == 20, 'Invalid length');
   var t1 = bs58check.encode(Buffer.concat([Uint8Array.from([0x1C, 0xB8]), pkh2]))
   console.log(t1)

Alternative 2
=============

Traceable Unified Addresses
---------------------------

A Traceable Unified Address is a reencoding of a transparent Zcash address into
a Unified Address [#zip-0316-unified-addresses]_. 

Motivations for Alternative 2
-----------------------------

Traceable Unified Addresses fit into the existing Zcash Unified Address
ecosystem. Existing Consumers that support Unified Addresses will automatically
be able to recognize a Traceable Unified Address as a valid Zcash address, but
will not be able to send to that address unless they update their code to
understand the new Receiver Typecode defined in this ZIP. Even in the case that
Traceable Receivers are not understood by the sending wallet, a Unified
Address-supporting wallet will be able to automatically provide good error
messages for their users to indicate that the wallet needs to be updated to
understand and send to these addresses.

In addition, by integrating with the Unified Address framework, it becomes
possible for the addresses being generated to include extra metadata, in
particular, metadata items such as an Address Expiry Height or Address Expiry
Date [#zip-0316-address-expiry]_ may be included. For exchange use cases such
as Binance's, it is useful to ensure that an address provided to a user has a
limited utility life, such that after expiration the user must obtain a new
address in order to be able to continue to send funds
[#binance-address-expiry]_.

Specification (Alternative 2)
-----------------------------

Upon activation of this ZIP, the section `Encoding of Unified Addresses` of ZIP
316 [#zip-0316-unified-addresses]_ will be modified to define a new
Traceable Receiver Type having typecode :math:`\mathtt{0x04}`, the value of
which MUST be the 20-byte **validating key hash** of a Zcash P2PKH Address as
defined in [#protocol-transparentaddrencoding]_.

The "Requirements for both Unified Addresses and Unified Viewing Keys" section
of ZIP 316 [#zip-0316-unified-requirements]_ will be modified as follows —
the text::

  A Unified Address or Unified Viewing Key MUST contain at least one
  shielded Item (Typecodes :math:`\mathtt{0x02}` and :math:`\mathtt{0x03}`).
  The rationale is that the existing P2SH and P2PKH transparent-only
  address formats, and the existing P2PKH extended public key format,
  suffice for representing transparent Items and are already supported
  by the existing ecosystem.

will be replaced by::

  A Unified Address MUST contain at least one Receiver and any number
  of Metadata Items. The selection of Receivers is further restricted 
  such that a Unified Address MUST **either** contain at least one shielded
  Receiver (Typecodes :math:`\mathtt{0x02}` and :math:`\mathtt{0x03}`), OR 
  MUST contain **only** a Traceable Address Receiver (Typecode
  :math:`\mathtt{0x04}`).

  A Unified Viewing Key MUST contain at least one shielded Item (Typecodes
  :math:`\mathtt{0x02}` and :math:`\mathtt{0x03}`). 

A Traceable Unified Address is produced from a mainnet Zcash P2PKH address by
executing the following steps:

1. Decode the address to a byte array using the Base58Check decoding algorithm
   [#Base58Check]_.
2. If the length of the resulting byte sequence is not 22 bytes or if its
   two-byte address prefix is not :math:`\mathtt{[0x1C, 0xB8]}`, return an
   error. Otherwise, let the **validating key hash** be the remaining 20 bytes
   of the array after removing the two-byte address prefix.
3. Construct a new Unified Address using a single Traceable Receiver
   :math:`\mathtt{0x04}` with the 20-byte **validating_key_hash** as its value.
   In addition, metadata items such as an Address Expiry Height or Address
   Expiry Date [#zip-0316-address-expiry]_ MAY be included.

Wallets and other Senders sending to a Traceable Unified Address MUST ensure
that only transparent UTXOs are spent in the creation of a transaction.

Reference Implementation (Alternative 2)
----------------------------------------

Javascript using `zcash_address_wasm` [#zcash_address_wasm]_::

    import init, { to_traceable_address } from 'zcash_address_wasm';
    init().then(() => {
       var t_address = "t1VmmGiyjVNeCjxDZzg7vZmd99WyzVby9yC";

       // Create a deposit address that is valid for 30 days
       var expiry_time = new Date();
       expiry_time.setDate(expiry_time.getDate() + 30);
       var expiry_unix_seconds = BigInt(Math.floor(expiry_time.getTime() / 1000));

       var traceable_address = to_traceable_address(t_address, expiry_unix_seconds);
       console.log(traceable_address);
    });

Rust::
   
    use zcash_address::{
        unified::{self, Encoding},
        Network, ToAddress, TryFromAddress, ZcashAddress,
    };

    struct TraceableReceiver {
        net: Network,
        data: [u8; 20],
    }

    impl TraceableReceiver {
        fn to_address(&self, expiry_time: u64) -> ZcashAddress {
            let traceable_addr = unified::Address::try_from_items(vec![
                unified::Receiver::Unknown {
                    typecode: 0x04,
                    data: self.data.to_vec(),
                },
                unified::Receiver::Unknown {
                    typecode: 0xE0,
                    data: expiry_time.to_le_bytes().to_vec(),
                },
            ])
            .expect("We know that this produces a valid address.");

            ZcashAddress::from_unified(self.net, traceable_addr)
        }
    }

    impl TryFromAddress for TraceableReceiver {
        type Error = unified::ParseError;

        fn try_from_transparent_p2pkh(
            net: Network,
            data: [u8; 20],
        ) -> Result<Self, zcash_address::ConversionError<Self::Error>> {
            Ok(TraceableReceiver { net, data })
        }
    }

Analysis of Alternative 1
=========================

Pros to Alternative 1
---------------------

- The reencoding from Zcash P2PKH addresses is extremely straightforward and
  relies only upon widely available encoding libraries.

Cons to Alternative 1
---------------------

- Existing wallets and other Consumers will regard the new address type as
  entirely invalid, and will not automatically prompt their users that they
  need to upgrade in order to send to this type of address.
- Creation of a new fully-distinct address type further fragments the Zcash
  address ecosystem. Avoiding such fragmentation and providing smooth upgrade
  paths and good error messages to users is exactly the problem that Unifed
  Addresses [#zip-0316-unified-addresses]_ were intended to avoid.
- The TEX address type does not provide any mechanism for address expiration.
  One of the questions Binance has asked has been what to do about users who
  have stored their existing transparent deposit address in their wallets, or
  as a withdrawal address for other exchanges or services. This is a
  challenging problem to mitigate now because address expiration was not
  previously implemented. We should not further compound this problem by
  defining a new distinct address type that does not provide a mechanism for
  address expiry.

Analysis of Alternative 2
=========================

Pros To Alternative 2
---------------------

- By integrating with the Unified Address framework, Consumers of Traceable
  Addresses that have not yet been upgraded to recognize these addresses can
  automatically be prompted to upgrade their wallets or services to understand
  the unrecognized receiver typecode.
- It is possible to include address expiration metadata in a Traceable Address,
  which can help to mitigate problems related to stored addresses in the
  future.
- Regardless of which proposal is adopted, the Zcash Community will need to
  work with exchanges other than Binance to update their address parsing logic
  to understand the new address format. By encouraging Consumers such as
  exchanges to adopt parsing for Unified addresses, this proposal furthers
  the original goal of Unified Addresses to reduce fragmentation in the address
  ecosystem.

Cons to Alternative 2
---------------------

- Unified Address encoding is slightly more complex than the proposed TEX address
  encoding, and requires use of the F4Jumble encoding algorithm [#F4Jumble]_. 
  However, this can be readily mitigated by providing a purpose-built library for
  Traceable Address encoding to Producers.

.. [#BCP14] `Information on BCP 14 — "RFC 2119: Key words for use in RFCs to Indicate Requirement Levels" and "RFC 8174: Ambiguity of Uppercase vs Lowercase in RFC 2119 Key Words" <https://www.rfc-editor.org/info/bcp14>`_
.. [#binance-delisting] `Zcash Community Forum thread "Important: Potential Binance Delisting" <https://forum.zcashcommunity.com/t/important-potential-binance-delisting/45954>`_
.. [#hanh-profile] 'Zcash Community Forum user @hanh <https://forum.zcashcommunity.com/u/hanh/summary>'_
.. [#hanh-suggestion] 'Ywallet developer @hanh's proposal <https://forum.zcashcommunity.com/t/important-potential-binance-delisting/45954/112>'_
.. [#zip-0316-unified-addresses] `ZIP 316: Unified Addresses <zip-0316#encoding-of-unified-addresses>`_
.. [#zip-0316-unified-requirements] `ZIP 316: Requirements for both Unified Addresses and Unified Viewing Keys <zip-0316#requirements-for-both-unified-addresses-and-unified-viewing-keys>`_
.. [#zip-0316-address-expiry] `ZIP 316: <zip-0316#address-expiration-metadata>`_
.. [#protocol-transparentaddrencoding] `Zcash Protocol Specification, Version 2023.4.0. Section 5.6.1.1 Transparent Addresses <protocol/protocol.pdf#transparentaddrencoding>`_
.. [#binance-address-expiry] `Zcash Community Forum post describing motivations for address expiry <https://forum.zcashcommunity.com/t/unified-address-expiration/46564/6>`_
.. [#Base58Check] `Base58Check encoding — Bitcoin Wiki <https://en.bitcoin.it/wiki/Base58Check_encoding>`_
.. [#F4Jumble] `ZIP 316: F4Jumble encoding <zip-0316#jumbling>`_
.. [#bip-0350] `BIP 350: Bech32m format for v1+ witness addresses <https://github.com/bitcoin/bips/blob/master/bip-0350.mediawiki>`_
.. [#zcash_address_wasm] `zcash_address_wasm: Proof of concept library for Traceable Address Encoding <https://github.com/nuttycom/zcash_address_wasm>`_