Building the Most Secure, Permissionless and Uncensorable Bitcoin Peg

Sergio Demian Lerner
Dec 2, 2020 · 18 min read

by Sergio Demian Lerner and Sebastian Lindner

TLDR. RSK’s 2-way peg protocol, called “the Powpeg”, has matured from its inception in 2018 as a federation to now include many decentralized qualities. The new RSK Powpeg protects private keys stored in special purpose PowHSMs based on tamper-proof secure elements (SE). Each PowHSM runs an RSK node in SPV mode, and so signatures can only be commanded by chain cumulative proof of work. Security is established in the Powpeg through the simplicity of a layered design we refer to as defense-in-depth. As Bitcoiners value security over the latest over-hyped functionality, we expect RSK to become the first choice of DeFi for Bitcoiners. Developers have a unique opportunity to build their dApps on a money vault, instead of money Lego. We encourage all Bitcoiners and DeFi players to use RSK and benefit from our 2 years of uninterrupted 2-way peg security combined with a merge-mined consensus backed by more than 50% of Bitcoin mining hashrate.


At RSK, our vision is to change the world for the better by creating a new and more inclusive financial system backed by the security of Bitcoin. We have already built the pillars of the ecosystem on the RSK sidechain through key innovative technologies. One such technology is a secure and robust 2-way peg called the Powpeg. A greater number of Bitcoiners are using RSK with more bitcoins as the robustness and security of the peg grows stronger. Bitcoiners value security over all, and we are committed to reach the highest security standards possible. The strength of RSK’s 2-way peg is paving the way for the Defi for Bitcoin movement, which is currently entering a new stage. Developers can find a unique opportunity to build their dApps on our secure and efficient money vault.

The RSK 2-way peg has been running uninterrupted since 2018, but under the hood, it has evolved. In general, two blockchains with distinct block formats can communicate in a fully decentralized manner if each one can evaluate the other blockchain’s consensus rules, and if cross-chain messages are not censored for long periods of time. Currently, only platforms with “Turing-complete” smart contracts can evaluate other blockchain consensus rules. Bitcoin for better or for worse lacks the ability to unlock coins over arbitrary predicates. Therefore, when we decided to create the first Bitcoin sidechain, we had to adapt to the only existing technology in Bitcoin to distribute trust among parties: multi-signatures. With a multi-signature it is possible to give a group of notaries the task to protect locked bitcoins, tolerating a certain amount of malicious, hacked or unavailable parties.

When the RSK genesis block was mined, the RSK Federation, an autonomous set of functionaries aimed at protecting the multi-signature, was born. The federation is controlled by the RSK Bridge, an unstoppable smart-contract running on RSK, and has been successfully working for over two years. In 2020 the RSK community decided it was time for the RSK peg to grow, both in security and in censorship resistance, evolving from a federated system to the Powpeg. The Powpeg is a unique 2-way peg system that secures the locked bitcoins with the same Bitcoin hashrate that establishes consensus. The set of functionaries still exists, but their role is mainly to keep their hardware and nodes connected and alive at all times; they do not directly control the Bitcoin multisig private keys. To highlight their new role and responsabilities, we call them pegnatories.

In this article we describe the key features of how the Powpeg works by analyzing the major participants involved. Afterwards, we discuss several security properties and censorship resistance of the Powpeg. A brief overview of how the Powpeg compares to several competing technologies follows. Finally, we describe RSK’s planned improvements to the Powpeg in the near future.

The Powpeg in RSK

The RSK researchers and developers strategy when designing the Powpeg differs from the one adopted by other teams that have built 2-way peg protocols. The RSK Powpeg is based on a layered security model, a practice we call “defense-in-depth”. Most other pegs rely on a single all-encompassing cryptographic protocol that solves a multi-party custody problem in an intricate way. These complex cryptographic protocols are delicate and very few entities can audit them thoroughly. Often these types of protocols become compromised, resulting in a sudden loss of security for users.

Other recent 2-way peg designs focus on cryptoeconomic incentives that take advantage of high collateralization in a new token. However, using a different token for the core sidechain functionality is not aligned with Bitcoin values. The RSK Powpeg bridge, instead, relies on multiple defenses, or layers, with each layer relatively simple to understand and test. This defense-in-depth approach is what has allowed RSK to grow from genesis to the current state without major problems, and without downtime. Since there is no collateral, the RSK Powpeg members are incentivized to participate by receiving a small portion of RSK transaction fees that is automatically channeled to them. As seen in the Ethereum ecosystem, transaction fees can eventually provide a sustained income for miners and sometimes even higher than the blockchain subsidy.

In the following sections we describe what the Powpeg is now and how we expect the Powpeg to improve, according to the different proposals being discussed by the RSK community. The following diagram shows the RSK Powpeg protocol as a system, how it relates to blockchain consensus, and the major participants that contribute to the overall security of the system:

The Powpeg components

Powpeg Pegnatories

Pegnatories are the organizations or individuals participating in the RSK PowPeg. Pegnatories keep specialized hardware called PowHSMs active and connected to special types of RSK full nodes (the “Powpeg Node”). A PowHSM is an external tamper-proof device that creates and protects one of the private keys required for the Bitcoin multi-signature protocol, only signing transactions proven valid by enough cumulative work. The Powpeg node is designed to have maximal connectivity and to communicate information about the RSK blockchain, specifically cumulative work, to the PowHSM.

The pegnatory’s role is to ensure that only valid multi-signature transactions are signed by the PowHSM through auditing changes in the PowHSM, the Powpeg node and the communication between them. Pegnatories themselves are not actively involved in the signing of transactions in any way, and do not participate in the production of blocks on the RSK blockchain.

Merged-miners and the Armadillo Monitor

A large portion of Bitcoin miners participate in RSK merge-mining, providing the persistence and liveness blockchain properties required for effectively securing the RSK network. The role of merged-miners in the Powpeg protocol is the largest and most crucial layer of our defence-in-depth approach in securing the bridge between RSK and Bitcoin. Pegnatories rely on the stability of merge-mining to ensure valid multi-signature transactions are signed and validated in a secure and timely manner.

Armadillo is a suite of tools designed to protect the RSK blockchain from adversarial merge-mining attacks. Included in Armadillo is a monitor whose role is to proactively ensure that the merge-mining algorithms used in the RSK and Bitcoin networks work as expected. The Armadillo monitor tracks all parallel RSK forks via inspection of Bitcoin merge-mining tags and if large conflicting forks are detected, Armadillo automatically sends alerts to economic actors, such as exchanges, and the Powpeg nodes held by pegnatories.

Armadillo is part of our defense-in-depth approach providing users of the 2-way peg secondary protection in the unlikely event that the merge-mining hashrate fails or the RSK network is attacked. As mentioned earlier, pegnatories oversee the signing of bitcoin transactions based on information provided by the RSK network to the Powpeg nodes. Adding another layer of defense over stable merge-mining hashrates, these Powpeg nodes listen for alerts from the Armadillo monitor so that the pegnatories can react accordingly by shutting down the signing process when malicious RSK forks are detected.

Economic Actors and the Bridge Contract

Economic actors such as merchants and exchanges, interact with the RSK 2-way peg by sending and receiving peg-in and peg-out transactions (described in more detail below) to the Bridge smart contract through the RSK network. The Bridge is a precompiled smart contract living in the RSK blockchain. The role of the Bridge is to maintain an up-to-date view of the Bitcoin blockchain, verify peg-in requests and command peg-outs. To achieve this functionality, the Bridge contract manages a Bitcoin wallet in SPV (Simple Payment Verification) mode. In this mode, transactions are confirmed by block headers and block headers are minimally validated, but the validation includes the expected proof of work. These validations ensure the Bridge wallet follows the Bitcoin chain which has the highest chain work, but does not check that the chain is valid.

Normally the chain with the highest chain work is the network’s best chain. In the history of Bitcoin there was only a single unintended network fork where one branch was invalid according to pre-established consensus rules. The fork length was 24 blocks. Therefore, in order to prevent intended or unintended invalid forks, the Bridge is designed to wait for 100 confirmations before confirming a peg-in transaction.

Peg-in/Peg-out and Other Properties of RSK Powpeg

We use the now standardized terms peg-in for the process that transfers bitcoins to the sidechain, and peg-out to the process that returns them back to Bitcoin. Performing a peg-in is as easy as sending the bitcoins to the Powpeg address and informing the Bridge about the Bitcoin transaction. The pegnatories provide a “watch tower” service on behalf of users and inform the Bridge of any peg-in as well.

The RSK Powpeg is an asset migration protocol and cannot abort a peg-in in case of network delays. The inability to abort a peg-in during network delays is what generally distinguishes asset migration protocols from exchange protocols. In exchange protocols, there is always a risk that the counterparty fails to unlock funds, and a user is forced to inform this failure within a bounded delay. Only in a special case does RSK refund the bitcoins of a peg-in operation, and this is when a cap, which gradually increases over time, is surpassed.

Technically, the RSK Powpeg is a hybrid peg. Peg-ins work in a fully decentralized manner using SPV proofs with the Powpeg members acting only as watchtowers to make sure bitcoin deposits are correctly informed to RSK. The user issuing the peg-in transaction can inform RSK if the Powpeg members fail to, assuming a worst-case scenario where the user is eventually online to inform RSK of the transaction. Since RSK assumes a user is the sender and receiver of a 2-way peg transaction, it is in the users best interest to inform the RSK network.

To perform peg-outs, the Bridge accepts requests from RSK accounts, and after thousands of confirmation blocks, the Bridge builds a Bitcoin peg-out transaction commanding the PowHSMs to sign this transaction. The Bridge selects the transaction inputs (or UTXOs) to include in the peg-out transactions, preventing selective censorship of UTXOs of any kind. The Bridge also coordinates and applies forced-delays to all treasury operations required when the Powpeg composition changes. Finally the Bridge serves as an Oracle to expose the Bitcoin blockchain to RSK smart-contracts. RSK peg-outs rely on the participation of the PowHSMs and collaboration of the majority of Powpeg members, as the PowHSMs need to sign every peg-out transaction. Assuming the practical security provided by PowHSMs, Powpeg peg-outs are also trustless.

RSK Powpeg Security

RSK peg is becoming one of the most secure multi-signature systems in existence. Technically, the security of the Powpeg relies on several concurrent strategies: defense-in-depth, coordination transparency, and public attestation. But a peg’s security does not only rely on its technical features. The real-world security must be analyzed from several points of view: technical, operational and reputational. In the following we focus on the Powpeg technical design decisions.


Defense-in-depth is realized by a careful separation of responsibilities so that compromising the system requires more than just compromising one element or one actor. The miners alone cannot steal the funds of the peg, neither can the pegnatories, nor the PowHSM manufacturer, nor the developers. The peg process is governed by consensus rules enforced in software and firmware, each protecting the other from bugs and vulnerabilities. Furthermore, the RSK community protects the code from mistakes. The community goal is to improve the Powpeg by adding more protective layers, each layer adding more security.

As described above, each pegnatory not only runs a Powpeg node, but also a PowHSM. In the coming months, all existing Powpeg members will have finished upgrading to the PowHSM version 2.0. As explained before, each PowHSM runs a consensus node in SPV mode, so commands need to be backed-up by real hashrate. Cheating the PowHSM becomes too difficult if not impossible without hacking several Bitcoin mining pools.

The term “vetocracy” is very useful in this context. A vetocracy is a system of governance whereby no single entity can acquire enough power to make decisions and take effective charge. Our defense-in-depth approach to security of the RSK Powpeg follows such an ideology, rendering attacks ineffective. A good question to ask when designing a 2-way peg system should be: “how closely does our protocol resemble a vetocracy”, saving many from endless religious debates over federated vs. decentralized systems.

Coordination Transparency

All communications between pegnatories occur over the RSK blockchain. There are no hidden messages between pegnatories and there is no pre-established subsystem that allows them to communicate secretly. All exchanged messages are public. While we can’t prevent hidden communication by hypothetical attackers in full control of the powpeg node executable code, we do prevent hidden collusion for long periods. As coordination is carried out over the public network, the system forces the PowHSMs to be exposed to the blockchain honest best chain, and allows all network participants to periodically know the PowHSM internal state. As for external hackers, the existence of a pre-established system for hidden coordination would be a powerful tool for privilege escalation as it can be used to to obtain pegnatories IPs and attempt targeted attacks. In RSK, pegnatories can change their IPs on a daily basis without problem, or, in the future, they could connect to the public network over Tor.

Finally the bridge smart-contract builds the peg-out transaction and won’t let any of the PowHSMs pick anything related to the transaction to sign. The whole transaction content is decided by RSK consensus.

Firmware Attestation

RSK PowHSM firmwares, as well the full node and Powpeg nodes, are generated using deterministic builds, yet currently the firmware installation on PowHSMs cannot be fully trust-free. An auditing group must attest for the correctness of the process of firmware installation on each new device or batch of devices. But we’re improving this area with a new defense: the next iteration of the PowHSM firmware (version 2.1) is capable of providing firmware attestation using security features provided by the device. Therefore, our next objective is to include firmware attestation as part of our deployment procedures, or even periodically as keepalive messages. Soon attestation messages will be stored in the blockchain and every member of the community will be able to validate PowHSM firmwares.

Proof of Work is Proof of Time

The cumulative work required by the PowHSM also works as a rate limiter or forced time delay for any attack: Given the fact that RSK has a large portion of the Bitcoin hashrate through merge-mining, the amount of cumulative difficulty required to “cheat” the PowHSM into confirming a peg-out over a malicious forked branch implies a large scale collusion by some of the major Bitcoin mining pools for a duration of multiple days. Such an attack would be transparent and visible to both the Bitcoin and RSK communities. As in banking vault opening procedures, the PowHSM is actually enforcing a time-delay that lets humans enter the loop if an attack is suspected.

Peg-in and Peg-out Finality

Since the Bitcoin blockchain and the RSK sidechain are not entangled in a single blockchain or in a parent-child relation as in a syncchain, the transfers of bitcoins between them must at some point in time be considered final. If not, bitcoins locked on one side would never be able to be safely unlocked on the other. Therefore, peg-in and peg-out transactions require a high number of block confirmations. Peg-ins require 100 Bitcoin blocks (approximately 2000 RSK blocks), and peg-outs require 4000 RSK blocks (approximately 200 Bitcoin blocks). Transactions signed by PowHSMs are considered final by RSK: these transactions are broadcast and assumed to be included sooner or later in the Bitcoin blockchain. Due to the need for finality, RSK consensus does not attempt to recover from an attack that manages to revert the blockchain deep enough to revert a final peg-in or peg-out transaction. If a huge reversal occurs, Powpeg nodes halt any future peg-out, and the malicious actors should not be able to double-spend the peg.

Decentralization — Building a Vetocracy

The use of PowHSMs in a federation is a step forward in decentralization, because a remotely compromised pegnatory does not compromise the main element for the security of the peg: a multisig private key. Since RSK has a large portion of the Bitcoin merge-mined hashrate, currently surpassing 51%, it seems extremely unlikely that a new group of merge-miners can hijack consensus long enough to force PowHSMs to perform a malicious peg-out. But the RSK community should never rest on its laurels. Instead, the RSK community is planning to apply once again a layered approach leading to more “additive security”.

One next possible step in the security of the peg, that we call the Powpeg^2 (Powpeg squared) is the deployment of a second federation that consists of active merge-miners. This federation is automatically chosen by the Bridge contract based on past merge-mining hashrate contributions. Each miner from the miner’s federation would be required to sign the peg-out transaction. In this scenario, each miner signature contributes with a specific score based on its contributed hashrate and the acceptance threshold is set as a minimum cumulative score. Such an implementation protects the pegged funds against a 51% of new malicious hashrate and truly decentralizes the security of the funds of the peg: anyone can participate, as long as it secures RSK with merge-mined hashrate.

Finally, all Bitcoin scripts in use by the RSK peg are designed to be very easily updated for compatibility with the drivechain BIP proposed for Bitcoin in 2016 and updated in 2018, by the RSK team. Thus we expect, in the long term, to add a drivechain as a new layer of security to our system. The drivechain is the ultimate goal described in the original RSK whitepaper.

The Powpeg Censorship-Resistance

The RSK Powpeg is also unique in the limited set of responsibilities delegated to each Powpeg node. In particular, pegnatories cannot apply selective censorship on peg-in and peg-out transactions. If one pegnatory attempts to censor a particular transaction, the others pegnatories sign and execute the peg-out transaction, causing the censorship to fail. If all pegnatories attempt to censor a transaction, then the pegnatories cannot continue to perform other peg-outs, as peg-outs are linked with UTXOs, and pegnatories cannot choose the UTXOs for the peg-out transactions. The peg-out UTXOs, including “change” UTXOs, are selected by the Bridge contract, forming a consensus-enforced chain. Therefore, selectively banning a transaction leads eventually to a complete halt of the Powpeg, and that’s why selective censorship is not possible.

Regarding the complete shutdown of the Powpeg by a single government, it would be very difficult to pull off as the pegnatories are geographically distributed all over the world. To protect from powerful worldwide coordinated attacks or attacks coming from three-letter agencies, RSK plans to add an emergency recovery multisig time-lock to activate one year after the Powpeg is proven dismantled. A shutdown attempt would only make RSK stronger and more resilient to subsequent attacks, as a new RSK Powpeg would rapidly expand and decentralize itself into a hundred individual users around the world, each running an PowHSM device and a Powpeg node over Tor.

How does the Powpeg Compare?

We strongly believe that Powpeg is a superior technology compared to its competitors. In the following we provide comparisons to other 2-way peg technologies, including RenBTC, wBTC, pBTC, tBTC:

RenBTC. Protocols, such as RenBTC, are highly complex based on new and unproven cryptography. On the other hand RSK is based on proven cryptography, and simple layers of protection through our defense-in-depth approach. For example, the RenBTC community discovered that the development team, without being open about it, implemented a simple centralized custody system. This is the inherent risk of complex protocols: nobody audits the code that is actually being run. Apart from this, Ren requires validators to stake the native work token, REN, in order to participate in the protocol, which reduces the security of the peg to the small amount of REN tokens staked.

wBTC wBTC is managed by a federation only composed of 3 publicly disclosed members (BitGo, Kyber Network, and Republic Protocol), for which any 2 of them can move the funds. In comparison, and although RSK Powpeg resembles a federation, more than 10 PowHSMs are held by many distinct and geographically distributed parties.

pTokens. Similar to pTokens, RSK protects private keys in an isolated environment. Unlike pTokens, RSK uses a Secure Element in the PowHSM that has a proven track record of withstanding sophisticated side-channel attacks. pTokens implementation is based on secure enclaves using the Intel SGX technology. SGX is supposed to provide an isolated environment that runs concurrently and in the same chip as untrusted software. SGX has a very doubtful track record and has been broken year after year by new attacks with fancy names: Spectre, Meltdown, ZombieLoad, RIDL, Fallout, Foreshadow, SGAxe and CrossTalk!. The last incident was as recent as June 2020. SGX is not yet (if ever) a technology that can be relied upon. On the contrary, RSK Secure Element is an independant microchip with embedded RAM and persistent storage, and therefore does not suffer from side-channel vulnerabilities arising from shared buses, memory, caches, and registers. The SE protects the multi-sig private key, with industry standard protections from fault-injection via power or electromagnetic glitches.

tBTC Similar to tBTC, RSK uses SPV proofs to inform peg-in operations. However tBTC requires 150% collateral in ether cryptocurrency to force anonymous vaults to keep their promise to protect the BTC received. This strategy suffers from two important weaknesses. First, as ETH/BTC price could vary in rapid succession, the overcollateralization may be not enough to sustain the 1:1 peg. Second, ether collateralization has to compete with many other options for receiving financial rent in Ethereum, such as staking and farming.

Sidechain peg operations should only net the imbalance generated by other more granular and faster transfer methods, such as atomic swaps and centralized exchanges. This implies that transaction volumes should initially grow and then reduce considerably. Also the premise of a 1:1 peg in a sidechain is that the exchange cost is low, so that both assets are considered equivalent. The inherent financial cost of locked capital with low transaction fees and low volume suggests that the only reason participants may choose to lock value is to participate in a secondary, highly profitable business based on the issuance of the collateral token (ether or a new one) or a transient opportunity of high returns on farming. Although, maybe more importantly, many Bitcoiners reject the idea that Bitcoin sidechains should use ether (or any money-like asset that tries to compete with Bitcoin). Some researchers believe that Bitcoins locked in the bitcoin network could also serve as collateral for a 2-way peg, but no positive results have been published yet.

In summary, the RSK community rejects protocols that are overly complicated because we believe that complexity is security’s biggest enemy. We believe in the right of developers to audit the code and get a reasonable independent opinion of its security. For example, the tBTC protocol, while promising, has shown to be so complex that even when audited by professionals it had a false start, and more problems afterward.

The Future

The RSK Powpeg is an area of active research and development, but we take the security of the peg very seriously, so improvements take time. We invite any member of the community or blockchain researcher to propose innovative ideas to improve it, sharing them on the research forum and following the RSKIP procedure to communicate them. The security and decentralization of the peg will continue to increase, not only technically but also in quality and quantity, and with more and better pegnatories participating. A number of improvements are being evaluated for the 2021 roadmap.

One of them, the Powpeg2 already mentioned, provides greater decentralization, bringing miners dynamically into the multisig that protects the pegged bitcoins. Another one is the extension of each Powpeg node with a second private key that is generated and used in a different security enclave, which could be a standard server, a cloud-based server with a cloud-HSM or an SGX application, among other possibilities. The peg-out process in each Powpeg node would require both signatures from each pegnatory. This scheme protects the peg against hardware private key leakage or key generation failures by the PowHSM. In the future RSK could also add another layer of protection using threshold signatures and dynamic signatory sub-groups. On the other hand, each new layer does also add a means to censor peg-outs.

The takeaway is that new security layers can be added on top of the existing ones, but every improvement must be critically evaluated in terms of security, censorship resistance and openness. The benefit of the layered approach is that if one layer fails, it can be removed while having a safety net of the remaining layers working.


The RSK peg has matured from a federation to a Powpeg. As the peg grows over time, more bitcoins are being moved into RSK. As Bitcoiners value security over the latest over-hyped functionality, we expect RSK to become the first choice of DeFi for Bitcoiners. Developers can find a unique opportunity to build their dApps on our secure and efficient money vault. Compared to alternatives, the Powpeg combines strong security based on layered protections, with maximum decentralization within the constraints established by the Bitcoin scripting system. We encourage all Bitcoiners and DeFi players to use RSK, and benefit from 2 years of uninterrupted 2-way peg security combined with a merge-mined consensus provided by a large portion of Bitcoin miners.

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