README.md

BTC Taproot Wrapped Keys Example

This code example demonstrates how to create a BTC Taproot KeyPair and sign a transaction with it within a Lit's Trusted Execution Environment (TEE). This a custom-wrapped keys implementation to perform Non-ECDSA compatible Schnorr signatures within a Lit Action.

Prerequisites

• An Ethereum private key

  • This private key will be used to:
    • Own the PKP we mint.
    • To pay for requests to Lit Network, the corresponding Ethereum account must have Lit Test Tokens. If you do not have any, you can get some from the faucet.

• BTC Wallet

  • We will use this to fund the newly created wallet and use it as a destination address for this example. You can use any wallet provider for testnets like Unisat. Make sure to have some balance in this, here's it's faucet

• BTC Endpoint

  • We will use this
    • To fetch UTXOs for creating transactions
    • For broadcasting transactions from inside of a Lit Action

• Node.js and NPM

  • Please have these installed before running the example.

Installation and Setup

1. Clone the repository
2. Install the dependencies: npm i
3. Create and fill in the .env file: cp .env.example .env
   • Required:
     • ETHEREUM_PRIVATE_KEY: This is the Ethereum private key that will be used to mint a PKP
     • NETWORK, BTC_ENDPOINT, DESTINATION_ADDRESS, AMOUNT_TO_SEND, FEE, BROADCAST: BTC transaction variables which specify transaction details as well the BTC network

Executing the Example

Here's an overview of how the code example works:

1. Specify ETHEREUM_PRIVATE_KEY in the environment with some funds on Chronicle Yellowstons
2. Run npm run pkp to create a pkp which will be owning the wrapped keypair
3. Specify PKP_PUBLIC_KEY in the environment
4. Run npm run create to create a new Taproot Keypair inside of a Lit Action and encrypt its private key to only be decrypted with PKPs session signatures which creates it
5. Specify WK_PUBLIC_KEY, CIPHERTEXT, DATA_TO_ENCRYPT_HASH returned by the last command in the environment
6. Fund the WK_PUBLIC_KEY address with some amount (AMOUNT_TO_SEND + FEE) so it gets some UTXOs and can sign and send transactions
7. Run npm run txn to create a Taproot transaction and send it to Lit Action for signing it. Here the sender is the newly generated public key and the receiver is your defined DESTINATION_ADDRESS. Lit Action will also broadcast the transaction as defined in BROADCAST variable

Underlying Working

• We first create a Lit Action performing containing two methods
  • createWallet: for generating a new key pair
  • signTaprootTxn: for Schnorr signing a Taproot transaction
• Then bundled the action to get a bundled executable code for the Lit environment using esbuild, we'll need to shim buffer and bitcoin dependencies here
• Create a Wrapped Key by calling createWallet which returns the public key, cipher text and data to encrypt hash
• Store these three carefully as cipher text and data to encrypt hash will always be required for signing within Lit action
• Create a new transaction hex which we want to be signed by the Lit Action
• Send the Transaction to the Lit Action with transaction hex, sighash and decryption parameters

Migrating examples to mainnet

Do the following changes in the environment

• Change BTC_ENDPOINT to https://mempool.space
• Change NETWORK to mainnet

Specific Files to Reference

• ./src/index.ts: Contains the core logic for the example
• ./src/actions/taproot-action.ts: Contains the Lit Action code