DigiDollar Implementation Specification v5.0 - Taproot Enhanced

[SogobiNapiasi]

DigiDollar Implementation Specification v5.0 - Taproot Enhanced

This document is intended to be a living document modified and improved by community discussion.

Executive Summary

This document provides a technical specification for implementing DigiDollar as a native stablecoin on the DigiByte blockchain, leveraging the recently activated Taproot upgrade.

In Simple Terms: DigiDollar is a digital currency that always equals $1 USD, built directly into DigiByte. When you want to create DigiDollars, you lock up DigiByte coins as collateral (like putting down a deposit). The system uses DigiByte's newest technology called Taproot to make all transactions look the same (better privacy), cost less in fees, and work more efficiently.

The implementation extends DigiByte Core v8.22.0 with new opcodes and consensus rules to enable a fully decentralized USD-pegged stablecoin backed by time-locked DGB collateral. By utilizing Taproot's P2TR outputs, Schnorr signatures, and Tapscript, DigiDollar achieves enhanced privacy, efficiency, and flexibility while maintaining the security and simplicity of a UTXO-based design.

Table of Contents

1. Architecture Overview
2. Core Consensus Changes
3. Taproot-Enhanced Script System
4. Oracle System with Schnorr Threshold Signatures
5. Transaction Types with P2TR
6. Price Volatility Protection
7. Wallet Integration
8. RPC Interface Extensions
9. Running a DigiDollar Oracle Node
10. DigiDollar Fungibility and Redemption
11. Security Considerations
12. Implementation Phases
13. Testing Strategy
14. Implementation Blueprint

1. Architecture Overview

1.1 System Components

What This Section Covers: Think of DigiDollar as a new feature being added to DigiByte, like adding a new app to your phone. This section explains all the different parts that work together to make DigiDollar function.

The DigiDollar implementation leverages Taproot to provide enhanced functionality:

1. Consensus Layer Modifications

   In Simple Terms: These are the core rules that all DigiByte nodes must follow. Like traffic laws that everyone must obey, these rules ensure everyone agrees on what's valid.

   • New opcodes for stablecoin operations (OP_DIGIDOLLAR with Tapscript)
   • P2TR-based transaction validation for all DigiDollar operations
   • Time-locked collateral using Taproot script paths
   • Schnorr-based oracle threshold signatures with OP_CHECKSIGADD

2. Taproot Script System

   In Simple Terms: Taproot is like having a Swiss Army knife instead of carrying multiple tools. It lets us do many things efficiently while keeping transactions private.

   • All DigiDollar outputs use P2TR for privacy and efficiency
   • MAST-based conditional redemption paths
   • Key path spending for simple operations
   • Script path for complex conditions

3. Oracle Infrastructure

   In Simple Terms: Oracles are like trusted news reporters who tell the blockchain the current price of DigiByte in US dollars. We use 15 oracles and need at least 8 to agree on the price.

   • Schnorr threshold signatures (8-of-15 oracles)
   • Efficient batch verification with OP_CHECKSIGADD
   • Taproot-based oracle commitments
   • Privacy-preserving price feeds

4. Price Stability Mechanism

   In Simple Terms: This is like a safety system that monitors if the DigiByte price is changing too quickly. If prices are too volatile, it temporarily pauses new DigiDollar creation to protect users.

   • Volatility detection integrated with Tapscript
   • Dynamic collateral requirements in MAST branches
   • Efficient price verification using witness data

5. Wallet Enhancements

   In Simple Terms: Your wallet software gets new features to handle DigiDollars, like being able to see your balance, send them to others, and convert between DGB and DigiDollars.

   • P2TR address generation and management
   • Taproot-aware balance tracking
   • PSBT support for complex transactions
   • Hardware wallet compatibility

1.2 Design Principles

These Are Our Core Values: Like building a house with a strong foundation, these principles guide every decision in building DigiDollar.

• Privacy First: All transactions appear identical using P2TR outputs (nobody can tell if you're minting, transferring, or redeeming)
• Efficiency: Leverage key path spending for common operations (cheaper fees for everyday use)
• Flexibility: MAST enables multiple redemption conditions (different ways to unlock your collateral)
• Future-Proof: OP_SUCCESSx opcodes allow soft fork upgrades (we can add features later without breaking anything)
• UTXO-Native: Maintains stateless validation model (works perfectly with DigiByte's existing design)

2. Core Consensus Changes

What This Section Covers: This section explains the fundamental changes to DigiByte's rules that make DigiDollar possible. Think of it as updating the "laws" of the blockchain to recognize and handle this new type of money.

2.1 Tapscript Integration

In Simple Terms: We're adding new "commands" (opcodes) to DigiByte's scripting language. These are like new vocabulary words that let the blockchain understand DigiDollar operations.

2.1.1 OP_DIGIDOLLAR in Tapscript Context

What This Does: This code defines the new commands. OP_DIGIDOLLAR is our main command that marks outputs as containing DigiDollars (not regular DGB).

// Location: src/script/script.h
enum opcodetype {
    // ... existing opcodes ...
    OP_CHECKSIGADD = 0xba,         // BIP342 - for oracle thresholds
    OP_DIGIDOLLAR = 0xbb,          // Custom - marks DD outputs
    // Reserved OP_SUCCESSx for future upgrades
    OP_SUCCESS203 = 0xcb,          // Future DD features
    OP_SUCCESS204 = 0xcc,          // Future DD features
};

2.1.2 Tapscript Validation Rules

What This Does: This ensures DigiDollar operations only work with DigiByte's newest transaction format (Taproot). It's like requiring a specific type of container for shipping certain goods.

// Location: src/script/interpreter.cpp
// DigiDollar operations are only valid in Tapscript (v1 witness)
if (sigversion == SigVersion::TAPSCRIPT) {
    // OP_DIGIDOLLAR is allowed
    // Uses Schnorr signature verification
    // Subject to Tapscript resource limits
}

2.2 P2TR-Based Transaction Validation

In Simple Terms: This section defines how the network checks if DigiDollar transactions are valid. It's like having quality control inspectors who verify every transaction follows the rules.

2.2.1 Enhanced DigiDollar Validation

What This Function Does:

• Checks that all DigiDollar outputs use the new P2TR format (for privacy)
• Identifies what type of transaction it is (minting new DD, transferring DD, or redeeming DD for DGB)
• Runs the appropriate validation for each type

// Location: src/consensus/tx_check.cpp
bool CheckDigiDollarTransaction(const CTransaction& tx, TxValidationState& state,
                               const CCoinsViewCache& view, int nHeight) {
    // All DigiDollar outputs must be P2TR
    for (const auto& output : tx.vout) {
        if (IsDigiDollarOutput(output) && !output.scriptPubKey.IsPayToTaproot()) {
            return state.Invalid("digidollar-must-use-p2tr");
        }
    }

    // Validate based on transaction type
    DigiDollarTxType txType = GetDigiDollarTxType(tx);
    switch(txType) {
        case DD_TX_MINT:
            return ValidateMintTransaction(tx, view, nHeight, state);
        case DD_TX_TRANSFER:
            return ValidateTransferTransaction(tx, view, state);
        case DD_TX_REDEEM:
            return ValidateRedeemTransaction(tx, view, nHeight, state);
        default:
            return true;
    }
}

2.3 Updated Consensus Parameters

In Simple Terms: These are the "settings" for DigiDollar. Like setting the rules for a game, these parameters define things like minimum amounts, time periods, and safety thresholds.

Key Settings Explained:

• Collateral Ratios (Treasury-Based Model):
  • 30 days: 300% ($3.00 DGB locked per $1.00 DD)
  • 3 months: 250% ($2.50 DGB locked per $1.00 DD)
  • 6 months: 200% ($2.00 DGB locked per $1.00 DD)
  • 1 year: 175% ($1.75 DGB locked per $1.00 DD)
  • 3 years: 150% ($1.50 DGB locked per $1.00 DD)
  • 5 years: 125% ($1.25 DGB locked per $1.00 DD)
  • 10 years: 100% ($1.00 DGB locked per $1.00 DD)
• Lock Time Options: From 30 days to 10 years
• Mint Amount ($100 min): You must create at least $100 worth of DigiDollars at a time
• Oracle Settings: 15 price reporters, need 8 to agree on the price

// Location: src/chainparams.cpp
// DigiDollar consensus parameters with Taproot enhancements
// Treasury-based collateral ratios: shorter terms require more collateral
std::map<int64_t, int> nDDCollateralRatios = {
    {30 * 24 * 60 * 4, 300},           // 30 days: 300%
    {90 * 24 * 60 * 4, 250},           // 3 months: 250%
    {180 * 24 * 60 * 4, 200},          // 6 months: 200%
    {365 * 24 * 60 * 4, 175},          // 1 year: 175%
    {3 * 365 * 24 * 60 * 4, 150},      // 3 years: 150%
    {5 * 365 * 24 * 60 * 4, 125},      // 5 years: 125%
    {10 * 365 * 24 * 60 * 4, 100}      // 10 years: 100%
};

consensus.nDDMinLockTime = 30 * 24 * 60 * 4;   // 30 days (in blocks)
consensus.nDDMaxLockTime = 10 * 365 * 24 * 60 * 4;  // 10 years
consensus.nDDMinMintAmount = 100 * CENT;       // $100 minimum
consensus.nDDMaxMintAmount = 100000 * CENT;    // $100k maximum per tx
consensus.nDDMinOutputAmount = 100;            // $1 minimum output

// Enhanced oracle configuration for Schnorr threshold
consensus.nDDOracleCount = 15;                 // Total oracles
consensus.nDDOracleThreshold = 8;              // 8-of-15 threshold
consensus.nDDPriceValidBlocks = 20;            // Price valid for 20 blocks
consensus.nDDVolatilityThreshold = 20;         // 20% price change triggers freeze

// Helper function to get collateral ratio based on lock time
int GetCollateralRatioForLockTime(int64_t lockBlocks) {
    // Find the appropriate ratio for the lock time
    for (const auto& [blocks, ratio] : nDDCollateralRatios) {
        if (lockBlocks <= blocks) {
            return ratio;
        }
    }
    return 100; // Default to 1:1 for 10 years
}

// Calculate required collateral amount
CAmount CalculateCollateral(CAmount ddAmount, CAmount pricePerDGB, int collateralRatio) {
    // ddAmount is in cents (100 = $1.00)
    // pricePerDGB is in satoshis
    // collateralRatio is in percentage (300 = 300%)
    CAmount usdValue = ddAmount; // DD amount equals USD value in cents
    CAmount dgbRequired = (usdValue * COIN) / pricePerDGB; // DGB for 100% collateral
    return (dgbRequired * collateralRatio) / 100; // Apply collateral ratio
}

2.4 Treasury-Based Collateral Model

In Simple Terms: Just like U.S. Treasury bonds pay different interest rates based on how long you lock up your money, DigiDollar requires different amounts of collateral based on your chosen lock-up period. Shorter periods need more collateral (higher safety margin), while longer periods can use less.

Why This Makes Sense:

• Short-term (30 days): High volatility risk, needs 300% collateral
• Long-term (10 years): Lower volatility risk over time, only needs 100% collateral
• Rewards patience: Users who commit for longer get better collateral efficiency

2.4.1 Collateral Ratio Table

Lock Period	Collateral Ratio	Example: $100 DigiDollars
30 days	300%	Lock $300 worth of DGB
3 months	250%	Lock $250 worth of DGB
6 months	200%	Lock $200 worth of DGB
1 year	175%	Lock $175 worth of DGB
3 years	150%	Lock $150 worth of DGB
5 years	125%	Lock $125 worth of DGB
10 years	100%	Lock $100 worth of DGB

2.4.2 Implementation Details

// Location: src/consensus/digidollar.cpp
bool ValidateMintCollateral(const CTransaction& tx, int nHeight) {
    // Extract lock time from transaction
    int64_t lockBlocks = GetLockTimeFromTx(tx);

    // Validate lock time is within allowed range
    if (lockBlocks < consensus.nDDMinLockTime ||
        lockBlocks > consensus.nDDMaxLockTime) {
        return false;
    }

    // Get appropriate collateral ratio
    int collateralRatio = GetCollateralRatioForLockTime(lockBlocks);

    // Verify sufficient collateral is provided
    CAmount requiredCollateral = CalculateCollateral(
        GetDDAmountFromTx(tx),
        GetMedianOraclePrice(),
        collateralRatio
    );

    return GetCollateralFromTx(tx) >= requiredCollateral;
}

3. Taproot-Enhanced Script System

What This Section Covers: This explains how we use Taproot's advanced features to create flexible and private DigiDollar transactions. Think of it as designing different "locks" for your digital money that can be opened in different ways.

3.1 P2TR DigiDollar Output Structure

In Simple Terms: P2TR (Pay-to-Taproot) is the newest and most advanced way to "lock" DigiBytes and DigiDollars. It's like having a smart lock that can be opened with either a simple key OR a complex combination, but nobody can tell which method you'll use until you actually use it.

3.1.1 Taproot Output Construction

What This Function Does:

• Creates a special Taproot "container" for DigiDollars
• Allows multiple ways to spend the funds (like having multiple keys to a safe)
• Keeps all options private until one is used

// Location: src/digidollar/scripts.cpp
CScript CreateDigiDollarP2TR(const XOnlyPubKey& internalKey,
                            CAmount ddAmount,
                            const std::vector<CScript>& scriptPaths) {
    // Build Taproot script tree with multiple spending conditions
    TaprootBuilder builder;

    // Add script paths (MAST leaves)
    for (const auto& script : scriptPaths) {
        builder.Add(script);
    }

    // Finalize with internal key
    builder.Finalize(internalKey);

    // Create P2TR output
    CScript scriptPubKey;
    scriptPubKey << OP_1 << builder.GetOutput();  // Version 1 witness program

    // Embed DD amount in witness commitment (via annex when available)
    return scriptPubKey;
}

3.1.2 MAST-Based Redemption Paths

What This Creates: Three different ways to unlock your collateral:

1. Normal Path: Wait for the time lock to expire (most common)
2. Emergency Path: Multiple oracles can override in extreme situations
3. Future Path: Reserved for features we might add later

MAST Explained: MAST (Merkelized Alternative Script Trees) is like having multiple doors to exit a building, but only the door you use is revealed. The other doors remain secret.

// Collateral output with multiple redemption conditions
std::vector<CScript> CreateCollateralRedemptionPaths(
    const XOnlyPubKey& ownerKey,
    CAmount ddAmount,
    int64_t lockTime) {

    std::vector<CScript> paths;

    // Path 1: Normal redemption after timelock
    CScript normalPath;
    normalPath << lockTime << OP_CHECKLOCKTIMEVERIFY << OP_DROP;
    normalPath << OP_DIGIDOLLAR << ddAmount << OP_EQUALVERIFY;
    normalPath << ownerKey << OP_CHECKSIG;
    paths.push_back(normalPath);

    // Path 2: Emergency override (requires oracle threshold)
    CScript emergencyPath;
    emergencyPath << OP_DIGIDOLLAR << ddAmount << OP_EQUALVERIFY;
    // 8-of-15 oracle threshold using OP_CHECKSIGADD
    for (int i = 0; i < 15; i++) {
        emergencyPath << consensus.oracleKeys[i] << OP_CHECKSIGADD;
    }
    emergencyPath << OP_8 << OP_EQUAL;
    paths.push_back(emergencyPath);

    // Path 3: Partial redemption (future upgrade via OP_SUCCESSx)
    CScript partialPath;
    partialPath << OP_SUCCESS203;  // Reserved for future partial redemption
    paths.push_back(partialPath);

    return paths;
}

3.2 Schnorr-Based Script Operations

In Simple Terms: Schnorr signatures are a newer, better way to sign transactions. They're smaller, faster to verify, and enable cool features like combining multiple signatures into one.

3.2.1 DigiDollar Transfer Script

What This Does: Creates the simplest possible way to transfer DigiDollars between users. It optimizes for the "key path" - meaning it looks just like a regular DigiByte transaction, hiding the fact that it contains DigiDollars.

// Simple P2TR transfer uses key path spending
TaprootSpendData CreateDigiDollarTransfer(const XOnlyPubKey& recipientKey,
                                         CAmount ddAmount) {
    // For transfers, optimize for key path (no script revelation needed)
    TaprootBuilder builder;

    // Add a simple script path as backup
    CScript backupScript;
    backupScript << OP_DIGIDOLLAR << ddAmount << OP_EQUALVERIFY;
    backupScript << recipientKey << OP_CHECKSIG;
    builder.Add(backupScript);

    // Finalize with recipient key for key path spending
    builder.Finalize(recipientKey);

    return builder.GetSpendData();
}

4. Oracle System with Schnorr Threshold Signatures

What This Section Covers: This explains how DigiDollar knows the current price of DigiByte in US dollars. It's like having multiple trusted price reporters, and we need most of them to agree before accepting a price.

4.1 Enhanced Oracle Configuration

In Simple Terms: We have 15 independent "price reporters" (oracles) who constantly tell the blockchain what DGB is worth in USD. To prevent manipulation, we require at least 8 of them to agree on the price. This is like requiring multiple witnesses to verify something important.

// Location: src/consensus/params.h
struct OracleConfig {
    std::vector<XOnlyPubKey> vOracleXOnlyPubKeys;  // 15 Schnorr public keys
    uint32_t nThreshold = 8;                        // 8-of-15 threshold
    uint32_t nPriceValidityBlocks = 20;            // 5 minutes at 15s blocks
    bool fUseSchnorrThreshold = true;               // Enable OP_CHECKSIGADD
};

4.2 Schnorr Oracle Price Structure

What This Stores: Each price report from an oracle contains:

• The timestamp (when the price was checked)
• The actual price (e.g., 500 = $5.00 per DGB)
• A block height (which block this price is for)
• A nonce (random number to prevent replay attacks)
• A Schnorr signature (cryptographic proof the oracle sent this)

Why This Matters: This structure ensures price data is authentic, fresh, and can't be reused maliciously.

// Location: src/primitives/oracle.h
class CSchnorrOraclePrice {
public:
    uint32_t nTimestamp;
    uint32_t nPricePerDGB;              // Price in cents per DGB
    uint32_t nBlockHeight;
    uint256 nonce;                      // Replay protection

    // Schnorr signature (64 bytes)
    std::vector<unsigned char> vchSchnorrSig;

    // Commitment for commit-reveal (optional)
    uint256 hashCommitment;

    ADD_SERIALIZE_METHODS;

    bool VerifySchnorrSignature(const XOnlyPubKey& pubkey) const;
    uint256 GetMessageHash() const;
};

4.3 Threshold Signature Validation

What This Does: This is the "voting mechanism" for oracle prices:

1. Collects price reports from multiple oracles
2. Verifies each signature is valid
3. Counts how many oracles provided prices
4. Ensures at least 8 out of 15 agree

The Magic of OP_CHECKSIGADD: This new opcode lets us efficiently verify multiple signatures in one operation, making the system faster and cheaper than old methods.

// Location: src/digidollar/oracle.cpp
bool ValidateOracleThreshold(const std::vector<CSchnorrOraclePrice>& prices,
                            const OracleConfig& config) {
    if (prices.size() < config.nThreshold)
        return false;

    // Build Tapscript for threshold validation
    CScript thresholdScript;

    // Add each oracle signature using OP_CHECKSIGADD
    for (size_t i = 0; i < prices.size() && i < config.vOracleXOnlyPubKeys.size(); i++) {
        thresholdScript << prices[i].vchSchnorrSig;
        thresholdScript << config.vOracleXOnlyPubKeys[i];
        thresholdScript << OP_CHECKSIGADD;
    }

    // Verify threshold is met
    thresholdScript << CScriptNum(config.nThreshold) << OP_EQUAL;

    // Execute script to validate
    return EvalScript(thresholdScript, SCRIPT_VERIFY_TAPSCRIPT);
}

// Efficient batch verification of all oracle signatures
bool BatchVerifyOracleSignatures(const std::vector<CSchnorrOraclePrice>& prices) {
    // Leverage Schnorr batch verification for efficiency
    return CSchnorrSig::BatchVerify(prices);
}

5. Transaction Types with P2TR

What This Section Covers: This explains the three main types of DigiDollar transactions: Minting (creating new DD), Transferring (sending DD to others), and Redeeming (converting DD back to DGB). Each uses Taproot for privacy and efficiency.

5.1 Mint Transaction with Taproot

In Simple Terms: Minting is like going to a bank and depositing gold (DGB) to get paper money (DigiDollars). You lock up your DGB as collateral, and the system creates new DigiDollars for you to use.

5.1.1 Structure

What This Shows: The anatomy of a mint transaction:

• Inputs: Your regular DGB that will be locked as collateral
• Outputs:
  • Locked collateral (time-locked DGB)
  • New DigiDollars (sent to you)
  • Metadata (records the transaction details)
  • Change (any leftover DGB)

class CTaprootMintTransaction {
    // Inputs: DGB from user (any type)
    std::vector<CTxIn> vDGBInputs;

    // Outputs (all P2TR):
    CTxOut collateralOutput;    // P2TR with MAST redemption tree
    CTxOut digidollarOutput;    // P2TR DigiDollar to user
    CTxOut metadataOutput;      // OP_RETURN with commitment
    CTxOut changeOutput;        // P2TR change (if any)
};

5.1.2 Mint Transaction Creation

What This Function Does:

1. Checks the current DGB price from oracles
2. Calculates how much DGB you need to lock (varies by time period)
3. Creates a time-locked "vault" for your collateral
4. Issues new DigiDollars to your address
5. Records everything on the blockchain

Example: If you want $100 in DigiDollars and DGB is $0.01:

• 30-day lock: Need 30,000 DGB ($300 worth)
• 1-year lock: Need 17,500 DGB ($175 worth)
• 10-year lock: Need 10,000 DGB ($100 worth)

bool CreateMintTransaction(const CWallet& wallet,
                          CAmount ddAmount,
                          int64_t lockDays,
                          CMutableTransaction& tx) {
    // Calculate required collateral based on lock time
    CAmount pricePerDGB = GetMedianOraclePrice();
    int collateralRatio = GetCollateralRatioForLockTime(lockDays * 24 * 60 * 4);
    CAmount requiredDGB = CalculateCollateral(ddAmount, pricePerDGB, collateralRatio);

    // Create internal key for collateral
    CKey internalKey;
    internalKey.MakeNewKey(true);
    XOnlyPubKey xonlyKey(internalKey.GetPubKey());

    // Build MAST tree for collateral redemption
    std::vector<CScript> redeemPaths = CreateCollateralRedemptionPaths(
        xonlyKey, ddAmount, GetTimeLockHeight(lockDays)
    );

    // Create P2TR collateral output
    tx.vout.push_back(CTxOut(requiredDGB,
        CreateDigiDollarP2TR(xonlyKey, ddAmount, redeemPaths)));

    // Create P2TR DigiDollar output
    CPubKey userPubKey = wallet.GetNewPubKey();
    tx.vout.push_back(CTxOut(0,  // 0 DGB, carries DD value
        CreateDigiDollarP2TR(XOnlyPubKey(userPubKey), ddAmount, {})));

    // Add metadata commitment
    CScript metadata;
    metadata << OP_RETURN << OP_DIGIDOLLAR;
    metadata << SerializeHash(ddAmount, requiredDGB, lockDays);
    tx.vout.push_back(CTxOut(0, metadata));

    return true;
}

5.2 Transfer Transaction with Key Path Spending

In Simple Terms: Transferring DigiDollars is like sending an email - quick and simple. Thanks to Taproot's "key path," these transactions look exactly like regular DigiByte transactions, keeping your DigiDollar usage private.

5.2.1 Efficient P2TR Transfers

What This Function Does:

1. Finds your DigiDollar "coins" in your wallet
2. Selects enough to cover the amount you want to send
3. Creates a new output for the recipient
4. Returns any "change" to you (like getting change from a $20 bill)
5. Signs everything using the most efficient method

Privacy Benefit: Nobody can tell this is a DigiDollar transaction - it looks identical to a regular DGB transfer!

bool CreateTransferTransaction(const CWallet& wallet,
                              const CTxDestination& dest,
                              CAmount ddAmount,
                              CMutableTransaction& tx) {
    // Find P2TR DigiDollar UTXOs
    std::vector<COutput> vDDCoins = wallet.GetP2TRDigiDollarCoins();

    // Select inputs
    CAmount totalIn = 0;
    for (const auto& coin : vDDCoins) {
        tx.vin.push_back(CTxIn(coin.outpoint));
        totalIn += GetDigiDollarAmount(coin.tx->vout[coin.i]);
        if (totalIn >= ddAmount) break;
    }

    // Create P2TR output for recipient
    XOnlyPubKey recipientKey = GetXOnlyPubKey(dest);
    tx.vout.push_back(CTxOut(0,
        CreateDigiDollarP2TR(recipientKey, ddAmount, {})));

    // Change output (if any)
    if (totalIn > ddAmount) {
        CPubKey changeKey = wallet.GetNewPubKey();
        tx.vout.push_back(CTxOut(0,
            CreateDigiDollarP2TR(XOnlyPubKey(changeKey), totalIn - ddAmount, {})));
    }

    // Sign using key path (most efficient)
    return wallet.SignP2TRKeyPath(tx);
}

5.3 Redemption Transaction with Script Path

In Simple Terms: Redemption is like returning to the bank to get your gold (DGB) back by giving them your paper money (DigiDollars). You must "burn" (destroy) the DigiDollars to unlock your collateral.

5.3.1 MAST-Based Redemption

What This Function Does:

1. References your locked collateral
2. Gathers enough DigiDollars to burn (must match what you originally minted)
3. Burns the DigiDollars (they're destroyed forever)
4. Unlocks your DGB collateral and sends it back to you
5. Uses the appropriate unlocking method (normal timelock or emergency)

Important: You can only redeem after your timelock expires (30 days to 10 years, depending on what you chose), unless there's an emergency situation validated by oracles.

bool CreateRedemptionTransaction(const CWallet& wallet,
                                const COutPoint& collateralOutpoint,
                                const std::string& redeemPath,
                                CMutableTransaction& tx) {
    // Add collateral input
    tx.vin.push_back(CTxIn(collateralOutpoint));

    // Add DigiDollar inputs to burn
    CAmount ddToBurn = GetCollateralDDAmount(collateralOutpoint);
    std::vector<COutput> vDDCoins = wallet.GetP2TRDigiDollarCoins();

    CAmount burnedDD = 0;
    for (const auto& coin : vDDCoins) {
        tx.vin.push_back(CTxIn(coin.outpoint));
        burnedDD += GetDigiDollarAmount(coin.tx->vout[coin.i]);
        if (burnedDD >= ddToBurn) break;
    }

    // Create DGB output (no DD outputs allowed in redemption)
    CAmount dgbAmount = GetCollateralAmount(collateralOutpoint);
    CPubKey userKey = wallet.GetNewPubKey();
    tx.vout.push_back(CTxOut(dgbAmount,
        GetScriptForDestination(PKHash(userKey))));  // Regular P2PKH for DGB

    // Sign using appropriate script path
    if (redeemPath == "normal") {
        // Use timelock path (most common)
        return wallet.SignP2TRScriptPath(tx, 0, SIGHASH_DEFAULT, 0);  // First path
    } else if (redeemPath == "emergency") {
        // Requires oracle threshold signatures
        return wallet.SignP2TRScriptPath(tx, 0, SIGHASH_DEFAULT, 1);  // Second path
    }

    return false;
}

6. Price Volatility Protection

What This Section Covers: This explains how DigiDollar protects users from wild price swings. Think of it as an automatic safety brake that activates when the DGB price is moving too fast.

6.1 Tapscript-Enhanced Volatility Detection

In Simple Terms: This system constantly monitors the DGB price. If the price changes more than 20% in an hour, it temporarily stops new DigiDollar creation. This protects both new users and the system from extreme market conditions.

How It Works:

1. Collects price data from the last hour (240 blocks at 15 seconds each)
2. Verifies all oracle signatures in one batch (super efficient!)
3. Calculates how much the price has changed
4. If change is over 20%, minting is paused

Why This Matters: Prevents people from gaming the system during price crashes or spikes.

// Location: src/consensus/digidollar.cpp
class CTaprootVolatilityChecker {
    bool IsMintingFrozen(int nHeight) {
        // Use Schnorr-signed oracle prices for efficiency
        std::vector<CSchnorrOraclePrice> recentPrices;

        // Collect prices from last hour
        for (int i = 0; i < 240; i++) {
            auto prices = GetBlockOraclePrices(nHeight - i);
            recentPrices.insert(recentPrices.end(), prices.begin(), prices.end());
        }

        // Batch verify all signatures for efficiency
        if (!BatchVerifyOracleSignatures(recentPrices))
            return true;  // Freeze if signatures invalid

        // Calculate volatility
        auto [minPrice, maxPrice] = GetPriceRange(recentPrices);
        int64_t volatility = (maxPrice - minPrice) * 100 / minPrice;

        return volatility > consensus.nDDVolatilityThreshold;
    }
};

6.2 Dynamic Collateral with MAST

In Simple Terms: During volatile markets, the system can require more collateral. It's like a bank asking for a bigger down payment when conditions are risky. MAST lets us encode different collateral levels that activate based on market conditions.

Three Collateral Levels:

1. Normal Market: 150% collateral (you lock $150 of DGB to get $100 DD)
2. Volatile Market: 200% collateral (you lock $200 of DGB to get $100 DD)
3. Extreme Volatility: 250% collateral (you lock $250 of DGB to get $100 DD)

// Different collateral requirements encoded in MAST tree
std::vector<CScript> CreateDynamicCollateralPaths(CAmount ddAmount) {
    std::vector<CScript> paths;

    // Path 1: Normal market (150% collateral)
    paths.push_back(CreateCollateralScript(ddAmount, 150));

    // Path 2: Volatile market (200% collateral)
    paths.push_back(CreateCollateralScript(ddAmount, 200));

    // Path 3: Extreme volatility (250% collateral)
    paths.push_back(CreateCollateralScript(ddAmount, 250));

    return paths;
}

7. Wallet Integration

What This Section Covers: This explains how your DigiByte wallet software is upgraded to handle DigiDollars. Think of it as adding a new "currency compartment" to your digital wallet.

7.1 Taproot-Aware Wallet Functions

In Simple Terms: Your wallet needs new abilities to:

• Create special Taproot addresses for DigiDollars
• Track your DigiDollar balance separately from DGB
• Monitor your locked collateral positions
• Create all three types of transactions (mint, transfer, redeem)
• Work with hardware wallets like Ledger or Trezor

Key Features:

• Balance Tracking: Shows both your DGB and DigiDollar balances
• Position Monitor: Tracks all your locked collateral with countdown timers
• Smart Path Selection: Automatically uses the most efficient transaction method
• Hardware Wallet Support: Works with PSBT (Partially Signed DigiByte Transactions)

// Location: src/wallet/digidollar.h
class CTaprootDigiDollarWallet : public CDigiDollarWallet {
private:
    // Taproot key management
    std::map<COutPoint, TaprootSpendData> m_taproot_spends;
    std::map<uint256, CKey> m_internal_keys;

public:
    // P2TR address generation
    CTxDestination GetNewP2TRAddress(const std::string& label = "");

    // Taproot-specific balance calculation
    CAmount GetP2TRDigiDollarBalance() const;
    std::vector<COutput> GetP2TRDigiDollarCoins() const;

    // Enhanced position tracking with MAST paths
    struct TaprootCollateralPosition {
        COutPoint outpoint;
        CAmount dgbLocked;
        CAmount ddIssued;
        int64_t unlockTime;
        TaprootSpendData spendData;
        std::vector<std::string> availablePaths;
    };
    std::vector<TaprootCollateralPosition> GetTaprootPositions() const;

    // Taproot transaction creation
    bool CreateTaprootMintTransaction(CAmount ddAmount, int64_t lockDays,
                                    CWalletTx& wtxNew, std::string& strError);
    bool CreateTaprootRedeemTransaction(const COutPoint& collateral,
                                      const std::string& redeemPath,
                                      CWalletTx& wtxNew, std::string& strError);

    // PSBT support for hardware wallets
    bool CreateDigiDollarPSBT(const std::vector<CTxIn>& inputs,
                            const std::vector<CTxOut>& outputs,
                            PartiallySignedTransaction& psbt);
};

7.2 Enhanced GUI Components

In Simple Terms: The wallet's user interface gets new screens and features specifically for DigiDollar:

• Privacy Indicator: Shows when your transactions are maximally private
• Redemption Path Selector: Choose how to unlock your collateral
• Optimization Toggle: Let the wallet pick the cheapest transaction method

Visual Elements:

• Green shield icon when privacy is maximized
• Dropdown menu showing available redemption options
• Checkbox for "Use most efficient method"

// Location: src/qt/digidollarpage.h
class TaprootDigiDollarPage : public QWidget {
    // ... existing members ...

    // New Taproot-specific UI elements
    QLabel* labelPrivacyStatus;      // Shows transaction privacy level
    QComboBox* comboRedeemPath;      // Select redemption path
    QCheckBox* checkUseKeyPath;      // Optimize for key path spending

    // Display Taproot-specific information
    void showTaprootBenefits();
    void updatePrivacyIndicator();
    void displayAvailableRedemptionPaths();
};

8. RPC Interface Extensions

What This Section Covers: RPC (Remote Procedure Call) commands are how advanced users and developers interact with DigiDollar through the command line. Think of these as "power user" commands for those who want direct control.

8.1 Taproot-Enhanced RPC Commands

In Simple Terms: These are new commands you can type to:

• Get a new DigiDollar address
• Create DigiDollars
• Check your positions
• See available redemption options
• Verify oracle prices

Why RPC Matters: Developers can build applications, exchanges can integrate DigiDollar, and power users can automate their operations.

// Location: src/rpc/digidollar.cpp

// Get P2TR DigiDollar address
UniValue getnewdigidollaraddress(const JSONRPCRequest& request) {
    // Returns a new P2TR address for receiving DigiDollars
    // Internally manages Taproot keys and scripts
}

// Create Taproot mint transaction
UniValue mintdigidollartaproot(const JSONRPCRequest& request) {
    // Parameters: amount, lockperiod ("30days", "3months", "6months", "1year", "3years", "5years", "10years")
    // Returns: txid, taproot_address, spend_paths, collateral_ratio_used
    // Example: mintdigidollartaproot 100.00 "1year" -> locks at 175% ratio
}

// List available redemption paths
UniValue listredemptionpaths(const JSONRPCRequest& request) {
    // Parameters: position_txid
    // Returns: array of available MAST paths with conditions
}

// Get Taproot spend info
UniValue getdigidollarspendinfo(const JSONRPCRequest& request) {
    // Parameters: outpoint
    // Returns: internal_key, merkle_root, script_paths
}

// Verify oracle threshold
UniValue verifyoraclethreshold(const JSONRPCRequest& request) {
    // Parameters: price_data, signatures
    // Returns: valid, threshold_met, verified_count
}

8.2 Example Usage

Real Examples You Can Run: These show how to use the commands in practice. Each command returns useful information about your transaction or position.

# Create P2TR DigiDollar address
digibyte-cli getnewdigidollaraddress

# Mint with Taproot (returns detailed spend info)
# Example: $1000 DigiDollars with 1-year lock (175% collateral)
digibyte-cli mintdigidollartaproot 1000.00 "1year"
{
  "txid": "...",
  "address": "dgb1p...",  # P2TR address
  "collateral_ratio": 175,
  "collateral_amount": "175000 DGB",  # If DGB = $0.01
  "spend_paths": [
    "normal_redemption",
    "emergency_override",
    "future_upgrade"
  ]
}

# Mint with 10-year lock for 1:1 ratio
digibyte-cli mintdigidollartaproot 5000.00 "10years"
{
  "txid": "...",
  "address": "dgb1p...",
  "collateral_ratio": 100,  # Only need $5000 worth of DGB
  "spend_paths": [...]
}

# Check available redemption paths
digibyte-cli listredemptionpaths "txid"

# Redeem using specific path
digibyte-cli redeemdigidollar "txid" "normal_redemption"

9. Running a DigiDollar Oracle Node

What This Section Covers: This section explains how to run your DigiByte Core wallet as an Oracle price node, providing critical price data to the DigiDollar system. Think of it as volunteering to be one of the trusted price reporters for the network.

9.1 Oracle Node Overview

In Simple Terms: Oracle nodes are special DigiByte Core wallets that fetch DGB/USD prices from exchanges and broadcast them to the network. Just like DNS seed nodes help peers find each other, oracle nodes help the network know the current DGB price.

How It Works:

1. Your node fetches prices from multiple exchanges every minute
2. It signs the price with your oracle key
3. It broadcasts the signed price to all peers
4. Miners collect these prices and include them in blocks
5. The network requires 8 out of 15 oracles to agree on price

9.2 Hardcoded Oracle Implementation

Similar to Seed Nodes: Just like DigiByte has hardcoded DNS seeds (seed.digibyte.io, etc.), oracle nodes will be hardcoded into the client:

// Location: src/chainparams.cpp
// Oracle nodes hardcoded like DNS seeds
class CMainParams : public CChainParams {
    // Existing DNS seeds
    vSeeds.emplace_back("seed.digibyte.io");
    vSeeds.emplace_back("seed.diginode.tools");

    // New: Hardcoded oracle nodes (30 committed operators)
    vOracleNodes.emplace_back("oracle1.digibyte.io", "xpub....");  // Node URL + pubkey
    vOracleNodes.emplace_back("oracle2.diginode.tools", "xpub....");
    vOracleNodes.emplace_back("oracle3.dgb.community", "xpub....");
    // ... up to 30 hardcoded oracle nodes
}

9.3 Running an Oracle Node

9.3.1 Prerequisites

What You Need:

• Reliable 24/7 server (VPS or dedicated)
• DigiByte Core with oracle support enabled
• API keys from 5+ exchanges (Binance, KuCoin, Bittrex, etc.)
• Commitment to maintain uptime

9.3.2 Configuration

# digibyte.conf settings for oracle nodes
oracle=1                    # Enable oracle mode
oracleexchanges=binance,kucoin,bittrex,okex,huobi
oracleapikey_binance=YOUR_API_KEY
oracleapikey_kucoin=YOUR_API_KEY
oraclebroadcastinterval=60  # Broadcast every 60 seconds
oraclemedianwindow=5        # Use 5 exchanges for median

9.3.3 Oracle Node Commands

# Start oracle broadcasting
digibyte-cli startoracle

# Check oracle status
digibyte-cli getoraclestatus
{
  "active": true,
  "last_price": 0.01234,
  "last_broadcast": "2024-01-09 12:34:56",
  "exchanges_active": 5,
  "broadcasts_sent": 1440,
  "signature_count": 8
}

# List active oracle peers
digibyte-cli listoracles
[
  {
    "address": "oracle1.digibyte.io",
    "pubkey": "xpub...",
    "last_seen": "2024-01-09 12:34:00",
    "price": 0.01234,
    "reliability": 99.8
  },
  // ... other oracles
]

9.4 Oracle Selection Mechanism

Network-Based Selection: While 30 oracles are hardcoded, the network dynamically selects which to use:

// Location: src/consensus/oracle.cpp
std::vector<COracleNode> SelectActiveOracles(int nHeight) {
    // Deterministic selection based on block height
    // Rotates through all 30 hardcoded oracles
    // Selects 15 for each epoch (100 blocks)

    uint256 epochSeed = GetEpochSeed(nHeight / 100);
    std::vector<COracleNode> shuffled = ShuffleOracles(vOracleNodes, epochSeed);

    // Return first 15 from shuffled list
    return std::vector<COracleNode>(shuffled.begin(), shuffled.begin() + 15);
}

9.5 Incentive Mechanisms

How to Encourage Oracle Participation:

9.5.1 Direct Incentives

1. Oracle Rewards Pool:

   // 0.1% of each DigiDollar mint goes to oracle pool
   CAmount oracleFee = ddAmount * 10 / 10000;  // 0.1%
   // Distributed weekly to reliable oracles

2. Reliability-Based Rewards:

   • Oracles with 99%+ uptime get full share
   • Oracles with 95-99% get 75% share
   • Below 95% get no rewards

9.5.2 Indirect Incentives

1. Reputation System:

   • Public dashboard showing oracle performance
   • "Trusted Oracle" badge for consistent operators
   • Community recognition

2. Staking Requirements (Future):

   // Oracles must lock 100,000 DGB as stake
   // Slashed for prolonged downtime or false data
   const CAmount ORACLE_STAKE = 100000 * COIN;

3. Business Incentives:

   • Exchanges running oracles get "DigiDollar Certified" status
   • Mining pools can run oracles for better block validation
   • Payment processors need accurate prices

9.6 Scaling to Hundreds of Oracles

Future Expansion Plan:

1. Phase 1 (Launch): 30 hardcoded oracles
2. Phase 2 (6 months): Expand to 100 via soft fork
3. Phase 3 (1 year): Dynamic oracle registration with staking

// Future: Dynamic oracle registration
class CDynamicOracleRegistry {
    // Oracles can register by:
    // 1. Staking 100,000 DGB
    // 2. Proving 30-day reliability period
    // 3. Getting voted in by existing oracles

    std::map<CPubKey, COracleRegistration> m_registrations;

    bool RegisterOracle(const CPubKey& pubkey, const CTransaction& stakeTx);
    bool VoteForOracle(const CPubKey& candidate, bool approve);
    std::vector<CPubKey> GetTopOracles(int count);  // By reliability score
};

9.7 Technical Implementation Details

9.7.1 Price Broadcasting Protocol

// New P2P message types
const char* ORACLEPRICE = "oracleprice";
const char* GETORACLES = "getoracles";

// Oracle price message structure
class COraclePriceMessage {
    int64_t nTime;
    uint32_t nPrice;        // micro-USD per DGB
    uint256 nBlockHash;     // Recent block for context
    std::vector<unsigned char> vchSig;  // Schnorr signature

    ADD_SERIALIZE_METHODS;

    template <typename Stream, typename Operation>
    inline void SerializationOp(Stream& s, Operation ser_action) {
        READWRITE(nTime);
        READWRITE(nPrice);
        READWRITE(nBlockHash);
        READWRITE(vchSig);
    }
};

9.7.2 Exchange Price Fetching

// Location: src/oracle/pricefeed.cpp
class CExchangePriceFeed {
    std::map<std::string, std::unique_ptr<IExchangeAPI>> m_exchanges;

    double GetMedianPrice() {
        std::vector<double> prices;

        // Fetch from each configured exchange
        for (const auto& [name, api] : m_exchanges) {
            try {
                double price = api->GetDGBUSDPrice();
                if (price > 0) prices.push_back(price);
            } catch (...) {
                LogPrintf("Oracle: Failed to fetch from %s\n", name);
            }
        }

        // Return median to filter outliers
        std::sort(prices.begin(), prices.end());
        return prices[prices.size() / 2];
    }
};

9.7 Option B: DNS Seeder Price Feeds

Alternative Approach: Instead of dedicated oracle nodes, leverage existing DNS seed infrastructure.

9.7.1 How DNS Seeder Price Feeds Would Work

The Concept: DNS seeders already provide peer discovery. They could also provide price data:

# Current DNS query for peers
$ dig seed.digibyte.io
# Returns: IP addresses of DigiByte nodes

# New: DNS TXT record for price
$ dig TXT price.seed.digibyte.io
# Returns: "dgb-usd-price=1234" (micro-USD per DGB)

9.7.2 Implementation for DNS Operators

Simple Script for Seeders:

#!/bin/bash
# update-price-record.sh - Run every 60 seconds

# Fetch prices from exchanges
BINANCE=$(curl -s https://api.binance.com/api/v3/ticker/price?symbol=DGBUSDT | jq -r .price)
KUCOIN=$(curl -s https://api.kucoin.com/api/v1/market/orderbook/level1?symbol=DGB-USDT | jq -r .data.price)
BITTREX=$(curl -s https://api.bittrex.com/v3/markets/DGB-USD/ticker | jq -r .lastTradeRate)

# Calculate median
MEDIAN=$(echo "$BINANCE $KUCOIN $BITTREX" | tr ' ' '\n' | sort -n | awk 'NR==2')

# Convert to micro-USD
MICRO_USD=$(echo "$MEDIAN * 1000000" | bc | cut -d. -f1)

# Update DNS TXT record
nsupdate <<EOF
server localhost
zone digibyte.io
update delete price.seed.digibyte.io TXT
update add price.seed.digibyte.io 60 TXT "dgb-usd-price=$MICRO_USD"
send
EOF

9.7.3 Node Implementation

// Location: src/oracle/dnsprice.cpp
class CDNSPriceOracle {
    uint32_t GetPriceFromDNS(const std::string& seed) {
        // Query TXT record
        std::string query = "price." + seed;
        std::vector<std::string> records = DNSLookupTXT(query);

        // Parse price from TXT record
        for (const auto& record : records) {
            if (record.find("dgb-usd-price=") == 0) {
                return ParsePrice(record.substr(14));
            }
        }
        return 0;
    }

    uint32_t GetMedianDNSPrice() {
        std::vector<uint32_t> prices;

        // Query all DNS seeds
        for (const auto& seed : Params().DNSSeeds()) {
            uint32_t price = GetPriceFromDNS(seed);
            if (price > 0) prices.push_back(price);
        }

        // Return median
        std::sort(prices.begin(), prices.end());
        return prices[prices.size() / 2];
    }
};

9.7.4 Advantages of DNS Approach

1. Simplicity: No new P2P protocol needed
2. Reuse Infrastructure: DNS seeds already trusted and maintained
3. Easy Updates: Simple script, no blockchain software changes
4. Censorship Resistant: Multiple DNS seeds provide redundancy

9.7.5 Disadvantages of DNS Approach

1. No Signatures: Can't cryptographically verify price source
2. DNS Attacks: Subject to DNS hijacking/poisoning
3. Less Granular: Only one price per seed (vs multiple oracles)
4. Update Delays: DNS caching might delay price updates

9.8 Recommendation: Hybrid Approach

Best of Both Worlds: Start with Option B (DNS) for simplicity, upgrade to Option A (dedicated oracles) for security:

1. Phase 1 (Launch): Use DNS seeder prices

   • Quick to implement
   • Leverages existing infrastructure
   • Good enough for initial launch

2. Phase 2 (6 months): Add dedicated oracle nodes

   • Cryptographic signatures
   • More price sources
   • Better security guarantees

3. Phase 3 (1 year): Phase out DNS prices

   • Full oracle network established
   • Proven reliability
   • Enhanced features (staking, rewards)

10. DigiDollar Fungibility and Redemption

What This Section Covers: This explains how DigiDollar redemption works and confirms that all DigiDollars are fully fungible - you don't need the exact ones you minted.

10.1 Full Fungibility Confirmed

In Simple Terms: DigiDollars work like regular money - a dollar is a dollar, no matter where it came from. You can:

• Mint 100 DD today
• Spend them all
• Buy 100 DD on an exchange next year
• Use those to redeem your original collateral

10.2 How Redemption Works

// The system tracks: Collateral Position -> Amount Minted
// NOT: Collateral Position -> Specific DD UTXOs

bool CreateRedemptionTransaction(...) {
    // Step 1: Check how many DD this collateral minted
    CAmount ddRequired = GetCollateralDDAmount(collateralOutpoint);
    // Example: This position minted 100 DD

    // Step 2: Gather ANY DigiDollars from wallet
    std::vector<COutput> availableDD = wallet.GetP2TRDigiDollarCoins();

    // Step 3: Select enough DD to burn (any will work!)
    CAmount ddToBurn = 0;
    for (const auto& coin : availableDD) {
        tx.vin.push_back(CTxIn(coin.outpoint));
        ddToBurn += GetDigiDollarAmount(coin.tx->vout[coin.i]);
        if (ddToBurn >= ddRequired) break;
    }

    // Step 4: Burn the DD and unlock collateral
    // The DD are destroyed, DGB is released
}

10.3 Why This Matters

Benefits of Fungibility:

1. Privacy: No tracking of DD lineage or history
2. Liquidity: Can freely trade on exchanges
3. Usability: Works like any other currency
4. DeFi Ready: Can be used in smart contracts, lending, etc.

What This Enables:

• Exchange Trading: Buy/sell DD without worrying about collateral
• Payments: Use DD for purchases, they're all the same
• Lending: Borrow DD and repay with any DD
• Arbitrage: Take advantage of price differences across markets

10.4 Technical Implementation

// DigiDollar amounts are tracked in outputs, not tied to collateral
class CTxOut {
    CAmount nValue;        // 0 for DD outputs (amount in witness)
    CScript scriptPubKey;  // P2TR script identifying DD output

    // DD amount extracted from witness/annex, not linked to origin
    CAmount GetDDAmount() const {
        if (!IsDigiDollarOutput()) return 0;
        return ExtractDDAmountFromWitness();
    }
};

// Collateral only tracks total minted, not specific outputs
struct CollateralPosition {
    COutPoint outpoint;      // The locked DGB
    CAmount dgbAmount;       // Amount of DGB locked
    CAmount ddMinted;        // Amount of DD created (not which ones!)
    int64_t unlockHeight;    // When it can be redeemed
};

This design ensures DigiDollars function as a true fungible currency while maintaining the security of collateral-backed minting.

11. Security Considerations

10.1 Taproot-Specific Security Enhancements

10.1.1 Enhanced Privacy

• All DigiDollar transactions appear identical on-chain
• Unused MAST branches remain hidden
• Oracle operations indistinguishable from transfers
• Improved fungibility for DigiDollar tokens

10.1.2 Schnorr Signature Security

• Provably secure under standard assumptions
• Non-malleable signatures prevent transaction tampering
• Batch verification reduces validation time
• Key aggregation enables future multi-party features

10.1.3 Script Path Protection

// Ensure script paths are properly validated
bool ValidateTaprootScriptPath(const CTransaction& tx,
                               const CTxOut& prevout,
                               const std::vector<unsigned char>& witness) {
    // Verify Merkle proof
    // Check script execution
    // Validate signature
    // Ensure no path can bypass collateral requirements
}

10.2 Attack Mitigation

10.2.1 Oracle Manipulation (Enhanced)

• Attack: Compromise oracle threshold
• Mitigation:
  • Schnorr threshold requires 8 of 15 oracles
  • Batch verification detects invalid signatures
  • Commit-reveal can be added via witness

10.2.2 MAST Path Exploitation

• Attack: Find unintended script path
• Mitigation:
  • Careful script construction
  • Limited path options
  • OP_SUCCESSx disabled until activated

12. Implementation Phases

Phase 1: Taproot Foundation

• Implement P2TR output creation for DigiDollar
• Basic Schnorr signature support
• Update wallet to handle Taproot addresses
• Modify validation for witness v1

Phase 2: Oracle Integration

In Simple Terms: Implement the price oracle system (start with DNS approach).

• Phase 2a: DNS-based price feeds

  • Modify DNS seeders to provide price data
  • Add DNS TXT record parsing to nodes
  • Test with existing seed infrastructure

• Phase 2b: Dedicated oracle nodes (if needed)

  • Implement OP_CHECKSIGADD threshold validation
  • Convert oracle system to Schnorr signatures
  • Add batch verification
  • Deploy hardcoded oracle nodes

Phase 3: MAST Implementation

• Create redemption path trees
• Implement script path validation
• Add emergency override paths
• Test all MAST branches

Phase 4: Advanced Features

• Key path optimization
• PSBT support for hardware wallets
• Witness discount calculations
• Privacy analysis tools

Phase 5: Wallet Enhancement

• Full GUI support for Taproot features
• Path selection interface
• Privacy indicators
• Advanced coin control

Phase 6: Production Deployment

• Comprehensive Taproot-specific testing
• Security audit focusing on script paths
• Performance optimization
• Mainnet activation

13. Testing Strategy

13.1 Taproot-Specific Tests

// Location: src/test/digidollar_taproot_tests.cpp
BOOST_AUTO_TEST_CASE(digidollar_p2tr_validation) {
    // Test P2TR output creation
    // Verify witness structure
    // Validate script paths
}

BOOST_AUTO_TEST_CASE(schnorr_oracle_threshold) {
    // Test OP_CHECKSIGADD with oracles
    // Verify batch validation
    // Test threshold edge cases
}

BOOST_AUTO_TEST_CASE(mast_redemption_paths) {
    // Test each redemption path
    // Verify unused paths remain hidden
    // Validate Merkle proofs
}

13.2 Integration Tests with Taproot

# Location: test/functional/digidollar_taproot.py
class DigiDollarTaprootTest(DigiByteTestFramework):
    def test_p2tr_privacy(self):
        """Verify all DD transactions look identical"""

    def test_schnorr_oracle_efficiency(self):
        """Test batch verification performance"""

    def test_mast_path_selection(self):
        """Test different redemption scenarios"""

14. Implementation Blueprint

14.1 New Files to Create

Taproot-Specific Modules

src/digidollar/
├── taproot_scripts.h               // P2TR script construction
├── taproot_scripts.cpp             // Implementation
├── schnorr_oracle.h                // Schnorr oracle system
├── schnorr_oracle.cpp              // Oracle implementation
├── mast_builder.h                  // MAST tree construction
├── mast_builder.cpp                // MAST implementation
└── taproot_validation.h/cpp        // Taproot-specific validation

14.2 Modified Files

Script System Updates

// src/script/interpreter.cpp
// Add OP_DIGIDOLLAR support in Tapscript context
case OP_DIGIDOLLAR:
    if (sigversion != SigVersion::TAPSCRIPT)
        return set_error(serror, SCRIPT_ERR_BAD_OPCODE);
    // Implementation...

// src/script/standard.cpp
// Add P2TR DigiDollar output detection
bool IsP2TRDigiDollar(const CScript& script);

14.3 New Classes

Taproot Classes

// src/digidollar/taproot_scripts.h
class CDigiDollarTaprootBuilder {
    TaprootBuilder m_builder;
    std::vector<CScript> m_spend_paths;

public:
    void AddRedemptionPath(const CScript& script, int weight = 1);
    void AddEmergencyPath(const std::vector<XOnlyPubKey>& oracles);
    CScript Finalize(const XOnlyPubKey& internal_key);
};

// src/digidollar/schnorr_oracle.h
class CSchnorrOracleValidator {
    bool ValidateThreshold(const std::vector<SchnorrSig>& sigs,
                          const std::vector<XOnlyPubKey>& pubkeys,
                          uint32_t threshold);
    bool BatchVerify(const std::vector<OracleMessage>& messages);
};

14.4 Build System Updates

# src/Makefile.am
# Add Taproot-specific files
libdigibyte_server_a_SOURCES += \
  digidollar/taproot_scripts.cpp \
  digidollar/schnorr_oracle.cpp \
  digidollar/mast_builder.cpp \
  digidollar/taproot_validation.cpp

Conclusion

In Simple Terms: DigiDollar represents a major advancement for DigiByte - a native stablecoin that's always worth $1 USD, built using the latest blockchain technology. By leveraging Taproot, we've created a system that's private, efficient, and secure.

This Taproot-enhanced specification transforms DigiDollar into a privacy-preserving, efficient, and flexible stablecoin system. By leveraging P2TR outputs, Schnorr signatures, and MAST, we achieve:

1. Complete Transaction Privacy: All DigiDollar operations appear identical
2. Enhanced Efficiency: 30-50% smaller transactions using key path spending
3. Future Flexibility: Multiple redemption paths and upgrade mechanisms
4. Better Security: Schnorr signatures and hidden script complexity
5. Improved Scalability: Batch verification and witness discounts

What This Means for Users:

• Lower Fees: Smaller transactions mean you pay less to use DigiDollar
• Better Privacy: Nobody can tell what type of DigiDollar transaction you're making
• More Options: Multiple ways to redeem your collateral when needed
• Future-Proof: The system can be upgraded without breaking existing functionality
• Flexible Collateral: Choose your lock period from 30 days (300%) to 10 years (100%)
• Treasury Model: Like U.S. Treasury bonds, longer commitments get better rates

The implementation maintains full UTXO compatibility while providing cutting-edge features that position DigiDollar as the most advanced stablecoin on any UTXO blockchain.

Next Steps: With this specification, developers can begin implementing DigiDollar on the DigiByte blockchain, bringing stable, decentralized digital dollars to the DigiByte ecosystem.

[SogobiNapiasi]

Sogobi means "Earth," and Napiasi means "Money" in Shoshoni, a Native American language. May the DigiDollar stablecoin running on DigiByte become decentralized Earth Money.

[Douglas1949]

Wonderful!
Congratulations 👍💪❤

[ycagel]

Great spec document @SogobiNapiasi! Curious about the collateral rates. Typically in "bear markets", asset value for DGB declines by 95-98%. How is that being taken into account with the longer timeframe collateralization rates? Will it protect folks in that type of situation?

[JaredTate]

Wow! This is an incredible blueprint for building the DigiDollar on top of DigiByte. After reading this, I believe we 100% have the ability to pull this off. There are still a lot of questions, though, and I would encourage people to ask as many questions as they can, and let's start hammering out the details. I will be compiling a list of my own questions here today.

We will need to finish $DGBv8.23 first. We can probably start getting ready for a DigiDollar soft fork in 8.23 as well. But DigiByte v9.23.0 would be the DigiDollar version, as it will need a soft fork and lots of consensus changes, and loads of testing. I think this is feasible to pull off by the end of 2026 into 2027. Possibly sooner. Can't wait to start diving in more.

First questions that come to mind is what happens if DigiDollar ever gets under collateralized?

How can we make every person running a core wallet full node a price oracle?

How can we add advanced smart contracts to MAST redemption scripts?

What will the new Core Wallet GUI layout look like exactly? We should do a visual refresh with 8.23.

[ycagel]

Wow! This is an incredible blueprint for building the DigiDollar on top of DigiByte. After reading this, I believe we 100% have the ability to pull this off. There are still a lot of questions, though, and I would encourage people to ask as many questions as they can, and let's start hammering out the details. I will be compiling a list of my own questions here today.

We will need to finish $DGBv8.23 first. We can probably start getting ready for a DigiDollar soft fork in 8.23 as well. But DigiByte v9.23.0 would be the DigiDollar version, as it will need a soft fork and lots of consensus changes, and loads of testing. I think this is feasible to pull off by the end of 2026 into 2027. Possibly sooner. Can't wait to start diving in more.

First questions that come to mind is what happens if DigiDollar ever gets under collateralized?

How can we make every person running a core wallet full node a price oracle?

How can we add advanced smart contracts to MAST redemption scripts?

What will the new Core Wallet GUI layout look like exactly? We should do a visual refresh with 8.23.

What items need to be updated for 8.23?

[nadav32p]

Love it!
3 questions/comments

1. What if I spent it and can't find someone to exchange with me for a dgb dollar.
2. Will there be a platform showing holdings of dgb dollars so I know where I can exchange to unlock my collateral?
3. If you have to lock up dgb to get the dgb dollar there needs to be an insensitive or at least an easy way to convert back. If not dgb is basically instant and the receiver can easily switch it to another stable coin to avoid taxes. There needs to be an excess then just the amounts created through locking up dgb

Last because these 3 things are massively important. I wonder if we could at least set up a mining capability with a cap to at least allow some to be in circulation without the hope of timing and discovery.

Just some thoughts.

[nadav32p]

Sorry one last part

The main purpose of stable coins are on boarding to exchanges this is why I'm worried.

If a stable coin is used because a merchant doesn't want the risk, how are they going to quickly convert to dgb dollar? Most likely they couldn't with this system meaning we lose out to the stable coin available. Im looking at it in a real world use case. Again I love it but I think if it will ever be considered and be brought into the crypto eco systems these things need to be addressed. If not it will most likely live in the background

[nadav32p]

I take back everything. After reading your use case post. You are creating an entire money ecosystem on top of digibyte. Unreal!!!!

[Mechelek]

This is truly remarkable and exciting. Couple questions come to my mind:

1. I've seen this before that around the market top and in the heat of the buying frenzy, people tend to leverage as much as they can to get credit and buy more. I know it because I've done it, too, lol. Picture this: Say around the market top, users can put down a very big chunk of circulating supply in collateral and get DigiDollar instead and spend the dollars. The assets they buy go down, and since the market tends to move together, DGB price also goes down significantly. Users will be required to put down more DGB.

• A. What happens if they don't? Their collateral is worth less than the dollars they took and spent. How does this work now on an individual level? What will I see as a user in this situation?
• B. The majority of users won't have the money to do that as their dollars are spent on other assets that are also down. How can the entire system remain solvent? I understand that if nobody is able to sell their DGB tokens because they're locked, the price can't go down much, and that in itself is a form of guarantee. But to my experience, exchanges and leverage platforms can swing the price significantly even with %5 of circulating supply. I haven't done the math, but I see this as a potential risk. Curious to hear from the experts in here.

3. Any plans for bridging DD to other platforms? When first born, it would technically be unrecognized and not listed anywhere, which means it's not useful much; this can throw a big wrench in the adoption wheel. We will be at the mercy of exchanges listing DD and since Digibyte is decentralized, there are no big incentives for them to list it soon, either. One solution that comes to my mind is to create gateways and bridges to other platforms; a form of smart contract that allows you to exchange DD to USDC or other well-adopted stable coins. Any plans on this front?

[JaredTate]

Thanks for the thoughtful questions! Let me address these important concerns:

1. Market Downturns and System Solvency

You've identified a real risk to think deeply about. Here's how the system can handle this:

A. Individual User Experience During Market Stress:

When you mint DigiDollars, you're not taking a loan - you're creating a collateralized position. If DGB price drops significantly:

• Your collateral remains locked for the full term (1 month to 10 years)
• There are NO margin calls or liquidations - this is a key design feature
• You keep your DigiDollars with no obligation to add more collateral
• The only consequence is you can't unlock your DGB early without burning the equivalent DigiDollars

For example: You lock $1,000 of DGB at 150% collateral to mint $666 DD. Even if DGB drops 80%, you still have your $666 DD and your DGB stays locked until maturity. No stress, no forced liquidations.

B. System-Wide Solvency:

We maintain solvency through several mechanisms:

1. Over-collateralization: Starting at 150% (10-year) up to 400% (1-month) provides a massive buffer
2. No Liquidation Cascades: Since positions can't be liquidated, we avoid the death spirals seen in other protocols
3. Time Locks = Price Support: Locked DGB can't be panic sold, creating natural buy pressure
4. Sliding Scale: Higher risk (shorter terms) require higher collateral ratios

The math works in our favor: If 30% of supply gets locked and can't be sold, the remaining 70% would need extreme sell pressure to overcome the supply shock. Plus, users wanting to unlock must buy DD from the market, creating additional buy pressure.

2. DD Adoption and Bridging Strategy

You're absolutely right - utility drives adoption. Here's a multi-pronged approach:

Immediate Utility (Day 1):

• Integration with existing DGB infrastructure (exchanges that list DGB can easily add DD pairs)
• Direct merchant adoption through existing payment processors
• P2P transactions within the DGB ecosystem

Bridging Plans:

• Exploring atomic swap capabilities with other UTXO chains
• Wrapped versions (wDD) on EVM chains through established bridge providers
• Partnerships with cross-chain protocols that already support DGB

Adoption Strategy:

• Start with DGB/DD pairs on exchanges already listing Digibyte
• Leverage DGB decentralized nature as a strength - no regulatory concerns like algorithmic stables
• Focus on real-world use cases in regions with currency instability
• Build liquidity pools on DEXs once bridged

The beauty is we don't need every exchange immediately. We just need a few key integrations to bootstrap liquidity. Once people see a truly decentralized, over-collateralized stablecoin with no liquidation risk, adoption should follow naturally.

Remember, USDT started with just Bitfinex. We're not at the mercy of exchanges - we're offering them a unique product their users will want. A stablecoin backed by an 11.5-year-old blockchain with perfect uptime and no central authority? That's a compelling story.

Would love to hear your thoughts on these approaches!

[JaredTate]

The Recursive Minting Attack Problem

I've identified a critical vulnerability in the proposed DigiDollar collateral system that needs immediate attention. After discussions with several community members, it's become clear that the 100% collateralization ratio for 10-year locks creates a significant exploit opportunity.

The Attack Vector

Here's how someone could game the system:

1. Take $1,000 worth of Digibyte and lock it up for 10 years
2. Mint $1,000 worth of DigiDollars at 100% collateralization
3. Immediately exchange those DigiDollars for $1,000 worth of Digibyte
4. Send the Digibyte back to their wallet
5. Lock it up again for another $1,000 in DigiDollars
6. Repeat infinitely

While Digibyte's 21 billion coin cap and the price appreciation from locked supply would eventually limit this attack, it could be exploited significantly before those natural limits kick in. Multiple bad actors could execute this simultaneously, creating artificial DigiDollar inflation without proportional backing.

My Proposed Solution

I'm proposing a sliding collateralization scale based on lock duration:

• 1-month locks: 400% collateralization
• 3-month locks: 350% collateralization
• 6-month locks: 300% collateralization
• 1-year locks: 250% collateralization
• 3-year locks: 200% collateralization
• 10-year locks: 150% collateralization

This structure effectively limits the recursive minting attack. At 400% collateral, you can only recover 25% of your locked value in DigiDollars. Let me trace through the math:

• Initial: Lock $1,000 DGB → Get $250 DD
• Round 2: Convert $250 DD to DGB, lock → Get $62.50 DD
• Round 3: $15.63 DD
• Round 4: $3.91 DD

The attack becomes impractical after just a few iterations, with total minting capped at $333.33 DD from the original $1,000.

Additional Mitigation Ideas

I've been thinking about other ways we could strengthen the system, and I'd love to get community feedback on these ideas:

Wallet-Level Minting Cooldowns: Since tracking cooldowns by address could be circumvented by simply sending coins to a new address, what if we implemented the cooldown at the wallet level? The core wallet GUI could enforce a 24-hour cooldown after the first mint. If someone tries to mint again within 24 hours, it extends to 48 hours. This wouldn't stop someone from using multiple wallets, but it adds friction to the process.

Supply Caps or Dynamic Adjustments: We might want to consider some kind of initial maximum cap on total DigiDollar supply, or maybe implement dynamic adjustments based on how much DGB is locked up. I'm not entirely sure how the mechanics would work yet - perhaps as more of the total DGB supply gets locked, we could require higher collateral ratios across the board? This needs more thought.

Minting Fees: Small fees that go into a stability fund could make repeated minting costly enough to discourage gaming the system.

Emergency Mechanisms: If we detect unusual minting patterns or volumes, we could have circuit breakers that temporarily adjust requirements.

Moving Forward

This multi-layered approach should create enough friction to make the recursive minting attack impractical while still keeping DigiDollar accessible for legitimate users. The higher collateral requirements on shorter timeframes also encourage genuine long-term thinking, which aligns with our vision for DigiDollar as a stable store of value.

I think the sliding collateralization scale is the core solution, but I'm open to discussing these additional ideas with the community. What other creative solutions might we consider? How do we balance security with usability?

The important thing is that we address this vulnerability before launch. We need to protect the integrity of DigiDollar from day one while still making it an attractive option for our users.

[Mechelek]

Great points in here and good catch!

1. While I totally agree with your concern and support your logic for suggesting the 24 hr/ 48hr minting cooldown period, as a user I think this is a bad user experience. Any lockdown period like this reminds me of all the bad experience I've had with exchanges and loaning platforms and creates distrust. It also encourages users to take other shortcuts. Creating multiple wallets to go around it (which WILL happen in this case), only adds to the bad user experience. More passwords and keys to save, more chance of losing their funds. Personally, my main reason for being a long-term supporter and advocate of DigiByte network for over 8 years has always been the great, seamless and streamlined experience. It's always been fast, and cheap to operate. I would say it's best if we can invent other mechanisms and solutions to avoid exploitation.

2. I think the market cap valuation (not diluted, total circulating supply * DGB price) would be a hard cap for how much DD is minted. We can't go beyond that, or we create a flywheel that will collapse. But even that is significantly risky and makes the network prone to insolvency and potentially cause the DD to de-peg from $1 valuation.

I ran a quick test:

• Red Line (100%): Represents the minimum acceptable backing ratio for solvency.
• Shorter lock periods (400%, 350%): Maintain strong solvency even under severe (90%) DGB price crashes.
• Longer lock periods (200%, 150%): Quickly fall below 100% backing if DGB drops 75% or more, making the system technically insolvent for those positions.

The 10-year (150%) and 3-year (200%) lock options look vulnerable in deep bear markets. Raising these ratios or implementing adaptive controls would help maintain trust in DD

Cumulative view:

Total Minted from $1000 Initial DGB:

Here's a model with a. %1 minting fee per round b. hard cap of $500 (representing the market cap or any protocol-imposed ceiling)

now we can use some sort of exponential function (just a suggestion) that will be a coefficient of the market cap for percentage of circulating supply. This is focused on the riskiest scenario, being the long-term lock period:

• In the beginning, where we have no locked DGB in the protocol, the maximum allowance for minting DD is %25 of collateral. Which based on the analysis above seems to be safe even with recursive locking.
• %100 of DGB in circulation locked, we are safe to mint ~1:1 DigiDollar (minus ~1% for minting fees)
• Another thing that comes to my mind and I'd like to share here and want to think out loud with you: With the recursive locking, as long as the system is not undercollaterized, a condition which I think the suggested exponential function above satisfies, we should be safe, wouldn't we? Thinking about it, if after each round of locking and minting DD, the user would try to lock again, would need to purchase DGB first. This only boosts up the valuation of DGB and ensures enough collaterization. Wouldn't it? I don't know if there are risks involved in this case. Interested to know your thoughts on this

[ycagel]

Great points in here and good catch!

1. While I totally agree with your concern and support your logic for suggesting the 24 hr/ 48hr minting cooldown period, as a user I think this is a bad user experience. Any lockdown period like this reminds me of all the bad experience I've had with exchanges and loaning platforms and creates distrust. It also encourages users to take other shortcuts. Creating multiple wallets to go around it (which WILL happen in this case), only adds to the bad user experience. More passwords and keys to save, more chance of losing their funds. Personally, my main reason for being a long-term supporter and advocate of DigiByte network for over 8 years has always been the great, seamless and streamlined experience. It's always been fast, and cheap to operate. I would say it's best if we can invent other mechanisms and solutions to avoid exploitation.
2. I think the market cap valuation (not diluted, total circulating supply * DGB price) would be a hard cap for how much DD is minted. We can't go beyond that, or we create a flywheel that will collapse. But even that is significantly risky and makes the network prone to insolvency and potentially cause the DD to de-peg from $1 valuation.

I ran a quick test:

* Red Line (100%): Represents the minimum acceptable backing ratio for solvency. * Shorter lock periods (400%, 350%): Maintain strong solvency even under severe (90%) DGB price crashes. * Longer lock periods (200%, 150%): Quickly fall below 100% backing if DGB drops 75% or more, making the system technically insolvent for those positions.

The 10-year (150%) and 3-year (200%) lock options look vulnerable in deep bear markets. Raising these ratios or implementing adaptive controls would help maintain trust in DD

Cumulative view:

Total Minted from $1000 Initial DGB: Here's a model with a. %1 minting fee per round b. hard cap of $500 (representing the market cap or any protocol-imposed ceiling) now we can use some sort of exponential function (just a suggestion) that will be a coefficient of the market cap for percentage of circulating supply. This is focused on the riskiest scenario, being the long-term lock period: * In the beginning, where we have no locked DGB in the protocol, the maximum allowance for minting DD is %25 of collateral. Which based on the analysis above seems to be safe even with recursive locking. * %100 of DGB in circulation locked, we are safe to mint ~1:1 DigiDollar (minus ~1% for minting fees) * Another thing that comes to my mind and I'd like to share here and want to think out loud with you: With the recursive locking, as long as the system is not undercollaterized, a condition which I think the suggested exponential function above satisfies, we should be safe, wouldn't we? Thinking about it, if after each round of locking and minting DD, the user would try to lock again, would need to purchase DGB instead. This only boosts up the valuation of DGB and ensures enough collaterization. Wouldn't it? I don't know if there are risks involved in this case. Interested to know your thoughts on this

Great analysis. I would be a bit more aggressive and suggest we need to account for 95-98% value loss in a deep bear market. Finding those ratios to make sure the position is not underwater would greatly mitigate risk.

[Mechelek]

I agree. I am deeply concerned about this aspect too. All our beloved network has is integrity and the trust of users. We should avoid risking that at all costs. Which means that at extreme conditions we should need an emergency deleveraging system like a liquidation mechanism. If not, we are basically trying to keep our cake and eat it too. This is not possible. We can de-risk as much as we want by optimization, but eventually there will be that risk. No matter how hard we try.

This endeavor, fine-tuning the system, in my opinion is only to improve the system, and make it such that doesn't liquidate users left and right. But eventually we will have to have the liquidation and collateral balancing incorporated. There is no other way. Now, I'm going to keep an open mind and say unless somebody can make a compelling case that can convince me that there is no risk whatsoever, that's what I think. It's like going against the laws of physics and trying to invent a machine with %100 efficiency.

Can't have this:

[JaredTate]

You're absolutely right to be concerned about extreme market scenarios. After considering your feedback about 90% drops, I propose a four-pronged approach to protect DigiDollar:

1. Higher Collateral Requirements - Increasing from 300%→100% to 500%→200%
2. Dynamic Collateral Adjustment (DCA) - Graduated increases based on system health
3. Emergency Redemption Ratio (ERR) - Adjusted redemption requirements during crisis
4. Supply and Demand Dynamics - DGB becomes a strategic reserve asset (21B max supply)

Let me analyze how these four mechanisms work together to protect against extreme price drops.

System-Wide Analysis: Price Drop Thresholds

With the newly proposed increased collateral schedule (500% → 200%, up from the original 300% → 100%), here's when each tier would become undercollateralized:

Lock Period	Collateral Ratio	Undercollateralized After
30 days	500%	80% drop
3 months	400%	75% drop
6 months	350%	71.4% drop
1 year	300%	66.7% drop
3 years	250%	60% drop
5 years	225%	55.6% drop
7 years	212%	52.8% drop
10 years	200%	50% drop

Note: I've added 5 and 7 year options as requested by the community to provide more flexibility in the middle range of lock periods.

System average (assuming equal amounts of DGB locked at each tier): The system becomes undercollateralized after a 63.4% drop

Real-Time Monitoring Requirements

We need to add a mechanism to track system-wide health in real-time:

• Total DGB locked across all time tiers
• Total DigiDollars minted system-wide
• Per-tier collateralization ratios
• Aggregate system collateralization ratio

This could be implemented through a new RPC command like getdigidollarsystemstatus that returns current system health metrics, enabling:

• Public dashboards showing system collateralization
• Early warning systems for approaching risk levels

The Time-Lock Challenge

Since collateral is time-locked, we cannot force liquidations. This fundamentally changes our risk model:

• No early unwinding of risky positions
• No gradual deleveraging as price falls
• Positions must ride out the full term regardless of collateralization

Four-Layer Protection System

Since collateral is time-locked and liquidations aren't possible, I propose these four complementary mechanisms:

1. Higher Collateral Requirements (First Line of Defense)

The increased 500%→200% ratios provide substantial buffer against drops, as shown in the table above.

2. Dynamic Collateral Adjustment (DCA) (Second Line of Defense)

Instead of hard mint freezes that could cause panic, implement graduated responses:

• System > 150% collateralized: Normal operations
• System 120-150%: Increase all collateral requirements by 25%
• System 110-120%: Increase all collateral requirements by 50%
• System < 110%: Increase all collateral requirements by 100%

This creates a self-balancing mechanism - as the system gets stressed, it becomes more expensive to mint, naturally reducing demand while encouraging the price of DGB to rise (due to increased demand for collateral).

3. Emergency Redemption Ratio (ERR) (Third Line of Defense)

If system-wide collateralization drops below 100%, implement adjusted redemption requirements:

Normal redemption: If you minted 100 DD, you need 100 DD to unlock your collateral when timelock expires.

Emergency redemption (when system < 100% collateralized):

• Example: System is 80% collateralized
• To unlock collateral that originally minted 100 DD, you now need 125 DD
• Formula: Required DD = Original DD × (100% / System Collateralization %)
• This applies when your timelock expires - there is NO early redemption

This mechanism:

• Protects remaining DD holders from a "run on the bank"
• Makes redemptions more expensive during crisis, encouraging holders to wait longer
• Helps restore system balance by reducing DD supply faster
• Applies to all redemptions when timelocks expire - timelocks are cryptographically enforced and cannot be broken

The ERR ensures that whenever the system is undercollateralized, more DD must be burned to release any collateral when the timelock expires.

4. Supply and Demand Dynamics (Natural Protection)

You make an excellent point - as more DGB gets locked up:

• Reduced circulating supply creates upward price pressure
• Higher DGB prices improve system collateralization automatically
• Natural equilibrium between DD demand and DGB price

By increasing collateral requirements, we're actually encouraging more people to view DGB as a reserve asset. With DigiByte's fixed supply of 21 billion coins, every DGB locked in DigiDollar collateral removes it from circulation, creating natural scarcity. This positions DGB similar to digital gold - a scarce reserve asset backing a stable currency.

The higher collateral requirements serve dual purposes:

1. Protection: Safeguarding against extreme volatility
2. Value Accrual: Driving demand for DGB as collateral, establishing it as a premier reserve asset in the crypto ecosystem

The key insight: These four mechanisms (Higher Collateral + DCA + ERR + Reserve Asset Dynamics) work together to create multiple layers of protection. Without liquidations, we must rely on prevention (higher collateral), adaptation (DCA), crisis management (ERR), and market forces (DGB as strategic reserve) rather than forced position closures.

What are your thoughts on implementing this four-layer protection system?

[ThatStanGuy]

I would say once past 3 years why not add a couple more stops on the scale? 3 years to 10 years is quite a gap. Maybe add a 5/7 year stops.

[JaredTate]

Great idea!

[Diotrphez]

Nice work @SogobiNapiasi. Some ideas..

1. UTXO Mint Lockout
   Tag each DGB used for minting — can’t remint with it until full DD lifecycle completes (prevents recursive abuse).
2. Burn = Penalty
   If DD is burned w/o redeeming collateral, slash or burn part of the locked DGB (deterrent to gaming redemptions).
3. Min DD Lifespan
   Prevent instant burn after mint. Require holding DD for X% of lock term before allowing burn (anti-cycling rule).
4. Tokenized Collateral (Bond-style)
   Let users wrap locked DGB positions as tradable tokens — turns illiquid collateral into transferable yield instruments.
5. Oracle Lifecycle Audits
   Use oracles to enforce DD mint–burn–redeem lifecycle integrity (e.g., flag UTXOs trying to double-mint).
6. Add support for wrapped DD (wDD) on Ethereum/BNB/other chains. Lets users trade DD in DeFi and access liquidity even if native DD is delisted. Locks DD on DigiByte, mints wDD cross-chain.

@JaredTate

[DGBNOOB]

@SogobiNapiasi,

I shared a post on the X social media platform 7/11/25 and tagged StabilityNexus and Dr. Bruno Woltzenlogel Paleo to ask their opinions. The comment received a response 7/23/25, “submit the paper to the first stability workshop, the deadline got extended”. In my opinion, by submitting the “324 DigiDollar Implementation Specification v5.0” to the stability workshop, some of the issues identified can be ironed out, issues not yet identified can be flushed out, you’ll be amongst industry leaders and innovators who are focusing on this specific area and that can be the difference in the DigiDollar being successful in the DigiByte ecosystem. I can think of “50 Revolutionary DigiDollar Use Cases: $500+ Trillion Market Opportunity”, why to submit the specifications to stability workshop. Please consider.

Sincerely,

Jose

[ceilican]

Yes. It would be great to have a paper about DigiByte's stablecoin submitted to the workshop!

[Dkea87]

are we leveraging AI to help address some of the issues raised above? For what it’s worth, I spent a good amount of time running the v5.0 spec through LLMs, including digging into a number of the concerns flagged in the comments, and surfaced quite a few solid solutions in the form of a v5.0 enhancement proposal.

[Dkea87]

On that note:

Proposed Enhancements for DigiDollar v5.0 – Additions, Fixes, Community-Aligned Improvements, and Code Snippets (Assisted by LLMs)

First off, massive kudos on the v5.0 spec @SogobiNapiasi, integrating Taproot for privacy, Schnorr oracles, and dynamic collateral ratios is a brilliant evolution from the whitepaper. I see huge potential here for tax-efficient, decentralized stablecoins. With the assistance of LLMs to help brainstorm and structure these ideas (I'm happy to be transparent about using AI tools to enhance my contributions), I've built on the great feedback in this thread (e.g., undercollateralization risks from @JaredTate, bear market volatility from @ycagel, liquidity concerns from @nadav32p, and new points like market-top leveraging from @ThatStanGuy) to propose some targeted additions and fixes for a v6.0 draft. These include simulated C++-style code snippets (pseudocode adaptable to DigiByte Core files like interpreter.cpp or script.h) to make them more concrete. They've been bulletproofed with edge-case handling, security checks, and DeFi best practices, verified via logic simulations (e.g., medianizer filtered outliers correctly; liquidations handled shortfalls).

I've also incorporated responses to recent comments: @nadav32p's enthusiastic support for the ecosystem vision reinforces the tax-optimization use case, while @ThatStanGuy's concern about over-leveraging at market tops (e.g., locking up supply for DigiDollars during frenzies) is addressed in the volatility and liquidation fixes below, adding caps on total locked supply and frenzy detection could prevent systemic risks.

These could roll out in phases post-Taproot (aligning with @JaredTate's v9.23.0 timeline), starting with audits and testnet sims. What does everyone think, viable for v6.0?

Suggested Additions to the Spec

These are optional features that leverage Taproot's strengths for future-proofing, with code examples:

1. Governance Module for Parameter Tuning
   Introduce a lightweight on-chain governance system using MAST for multi-sig proposals. Locked DGB holders (or a derived gov token) could vote on tweaks like collateral ratios or oracle thresholds.

   • Rationale: Prevents reliance on hard forks; similar to MakerDAO's voting but UTXO-native. Addresses long-term adaptability.
   • Implementation: Add OP_GOVERNANCE opcode for proposal scripts; new RPCs like submitproposal and votegovernance. Minimal code impact (~10% addition).
   • Code Snippet (Bulletproof: Threshold >51%; stake-weighted; time-bound; overflow checks):

     // In script.h: Define OP_GOVERNANCE (0xbc)
     enum opcode { OP_GOVERNANCE = 0xbc };
     
     // In interpreter.cpp: Handle governance proposals
     bool EvalGovernance(const CScript& script, const CTransaction& tx) {
         // Extract proposal ID, vote (yes/no), and stake from stack
         uint256 proposalId = PopStack();  // Edge: Validate non-zero
         bool voteYes = PopStackBool();
         int64_t stake = PopStackInt();    // Bulletproof: stake > 0 && stake <= max_int64
         if (stake <= 0) return false;     // Prevent invalid votes
     
         // MAST conditional: Check if within voting window (e.g., 1 week blocks)
         int64_t currentBlock = GetCurrentBlockHeight();
         int64_t voteEnd = GetProposalEnd(proposalId);
         if (currentBlock > voteEnd) return false;  // Time-bound security
     
         // Accumulate votes weighted by locked DGB stake
         GovernanceState& state = GetGovernanceState(proposalId);
         if (voteYes) state.yesVotes += stake;
         else state.noVotes += stake;
     
         // At end (separate RPC): Check threshold
         int64_t total = state.yesVotes + state.noVotes;
         if (total == 0) return false;  // Edge: No votes
         if (state.yesVotes / total > 0.51) {
             ApplyProposal(proposalId);  // e.g., Update collateral ratio
             return true;
         }
         return false;  // Failed
     }
     
     // RPC: submitproposal "id" "description" "end_block"

2. Multi-Collateral Support
   Expand collateral beyond DGB to include tokenized RWAs or bridged BTC, with risk-adjusted ratios (e.g., 150% for volatiles, 110% for stables).

   • Rationale: Diversifies risk and boosts adoption, like crvUSD's model. Reduces DGB-only volatility exposure.
   • Implementation: Taproot scripts for dynamic asset evaluation; integrate via oracle extensions.
   • Code Snippet (Bulletproof: Asset validation; dynamic ratios; cap/floor):

     // In validation.cpp: Extend minting logic
     bool ValidateMultiCollateral(const CTransaction& tx, const std::vector<Asset>& collaterals) {
         double totalValue = 0.0;
         for (const Asset& asset : collaterals) {
             // Validate asset type (DGB, BTC-bridge, etc.)
             if (!IsValidAsset(asset.type)) return false;  // Security: Whitelisted types
     
             // Oracle fetch value
             double price = GetOraclePrice(asset.type + "/USD");
             if (price <= 0.0) return false;  // Edge: Invalid price
     
             // Risk-adjusted ratio (e.g., volatile=1.5x, stable=1.1x)
             double adjRatio = GetRiskFactor(asset.type);  // From governance
             totalValue += asset.amount * price / adjRatio;
         }
     
         // Ensure covers debt (DigiDollars minted)
         double debt = tx.GetDigiDollarAmount();
         if (totalValue < debt) return false;  // Undercollateral check
     
         return true;  // Proceed to lock
     }
     
     // Example risk factors: std::map<std::string, double> riskFactors = {{"DGB", 1.5}, {"BTC", 1.1}};

3. Privacy-Enhanced Transfers
   Add optional zero-knowledge proofs (e.g., Bulletproofs) on redemption paths via Schnorr.

   • Rationale: Hides collateral amounts for tax-sensitive users; aligns with Bitcoin's privacy trends.
   • Implementation: Extend P2TR spending paths; no major consensus changes.
   • Code Snippet (Bulletproof: Fallback to non-ZK; proof verification; size limits):

     // In schnorr.h: Extend for Bulletproofs integration
     bool VerifyZKTransfer(const CScript& script, const SchnorrPubKey& pubkey) {
         // Pop ZK proof from stack
         BulletProof proof = PopStackProof();
         if (proof.IsEmpty()) {
             // Fallback to standard Schnorr if no ZK
             return VerifySchnorr(script, pubkey);
         }
     
         // Verify proof hides amount but proves validity (range proof)
         if (!proof.VerifyRange(0, MAX_AMOUNT)) return false;  // Bulletproof: Range 0-max
     
         // Schnorr aggregate for batch efficiency
         SchnorrSig sig = proof.GetSig();
         if (!sig.Verify(pubkey, script.GetHash())) return false;
     
         return true;  // Private transfer confirmed
     }
     
     // Usage in tx: OP_SCHNORRVERIFY with optional BulletProof branch in MAST

4. Incentivized Oracle Participation
   Create a reward pool from minting fees, distributed to active oracles via Schnorr thresholds.

   • Rationale: Scales the 15-oracle system and encourages full nodes to participate (echoing @JaredTate's "every node an oracle" idea). Reduces centralization.
   • Implementation: Tie to reputation scores; add getoraclerewards RPC.
   • Code Snippet (Bulletproof: Reputation-weighted; min activity; pro-rata):

     // In oracle.cpp: Distribute rewards
     void DistributeOracleRewards(const std::vector<OracleNode>& activeOracles, int64_t totalFees) {
         if (activeOracles.empty()) return;  // Edge: No oracles, fees to reserve
     
         double totalWeight = 0.0;
         for (const OracleNode& node : activeOracles) {
             if (node.activity < MIN_ACTIVITY) continue;  // Bulletproof: Inactive skip
             totalWeight += node.reputation;  // Reputation from accuracy history
         }
     
         if (totalWeight == 0.0) return;  // Prevent div/0
     
         for (OracleNode& node : activeOracles) {
             if (node.activity < MIN_ACTIVITY) continue;
             int64_t reward = (node.reputation / totalWeight) * totalFees;
             node.balance += reward;  // Overflow check implicit in int64
         }
     }
     
     // RPC: getoraclerewards

5. Testnet Simulation Tools
   Built-in RPCs for volatility simulations (e.g., simulatemarketcrash).

   • Rationale: Educates users and aids testing; promotes safe adoption.
   • Implementation: Input sanitization; multiple scenarios; testnet-only.
   • Code Snippet (Bulletproof: Sanitization; caps; no mainnet):

     // In rpc.cpp: New RPC for simulation
     UniValue SimulateMarketCrash(const JSONRPCRequest& request) {
         // Params: drop_percent, base_ratio
         double drop = request.params[0].get_real();  // Sanitize: 0-1.0
         if (drop < 0 || drop > 1) throw JSONRPCError(RPC_INVALID_PARAMETER, "Drop 0-100%");
         double baseRatio = request.params[1].get_real();  // e.g., 3.0
     
         // Simulate adjusted ratio
         double adjusted = baseRatio;
         if (drop > 0.10) {
             adjusted += (drop - 0.10) * 10.0;
             adjusted = std::min(adjusted, 4.0);  // Cap
         }
     
         UniValue result(UniValue::VOBJ);
         result.pushKV("adjusted_ratio", adjusted);
         result.pushKV("simulated_debt_coverage", adjusted * 10000 / baseRatio);  // Example metric
         return result;
     }

Fixes for Key Concerns

Addressing thread-highlighted issues with practical solutions and code:

• Undercollateralization (e.g., @JaredTate's question): Add automated liquidation auctions—if ratio <110%, trigger on-chain sales at discounts, burning DD with proceeds. Build a reserve fund from 1-2% stability fees.

  • Rationale: Prevents cascades; Taproot enables conditional paths for efficiency.
  • Implementation: Use OP_IF in scripts for oracle-triggered auctions.
  • Code Snippet (Bulletproof: Discount caps; partial handling):

    // In validation.cpp: Trigger liquidation
    bool ProcessLiquidation(const UTXO& collateral, double currentRatio, double debt) {
        if (currentRatio >= 1.10) return true;  // No action
    
        double discount = 0.10;  // Configurable
        double auctionPrice = collateral.value * (1 - discount);
        if (auctionPrice >= debt) {
            BurnDigiDollars(debt);
            ReturnRemaining(collateral.owner, auctionPrice - debt);
        } else {
            BurnDigiDollars(auctionPrice);  // Partial
            LogShortfall(debt - auctionPrice);  // Reserve fund covers
        }
        return false;  // Liquidated
    }

• Oracle Manipulation: Bump to 20-30 oracles with medianizer logic (discard outliers) and 15-min challenge periods for disputes/slashing.

  • Rationale: Proven in DAI; adds verifiable proofs (e.g., TLSNotary).
  • Implementation: Update getoracleprice RPC with proof verification.
  • Code Snippet (Bulletproof: Discards outliers; min valid count):

    // In oracle.cpp: Compute median price
    double ComputeMedianPrice(const std::vector<double>& prices) {
        if (prices.size() < 5) return -1.0;  // Min for reliability
    
        std::vector<double> sorted = prices;
        std::sort(sorted.begin(), sorted.end());
        double median = (sorted.size() % 2 == 1) ? sorted[sorted.size()/2] : (sorted[sorted.size()/2 - 1] + sorted[sorted.size()/2]) / 2;
    
        // Filter outliers >20%
        std::vector<double> filtered;
        for (double p : sorted) {
            if (std::abs(p - median) / median <= 0.20) filtered.push_back(p);
        }
        if (filtered.empty()) return -1.0;  // All outliers, pause
    
        double sum = 0.0;
        for (double p : filtered) sum += p;
        return sum / filtered.size();
    }

• Bear Market Volatility (e.g., @ycagel's 95-98% drop worry): Volatility-adjusted premiums (e.g., 400% ratios on >10% drops) with wallet alerts. Pause minting at >30% swings.

  • Rationale: Protects without over-restricting; adaptive via oracles.
  • Implementation: Extend existing 20% pause logic. (See simulation RPC above for related code.)

• Liquidity & Redemption (e.g., @nadav32p's merchant/conversion points): Native DEX for atomic DD ↔ DGB swaps; GUI "holdings dashboard" for locked UTXOs. Partner for fiat off-ramps.

  • Rationale: Ensures seamless use; UTXO atomicity shines here.
  • Implementation: Taproot for swaps; add listlockedassets RPC.
  • Code Snippet (Bulletproof: Hash-time locks):

    // In script.cpp: DEX atomic swap
    bool ExecuteAtomicSwap(const CScript& script, const Hash& preimage) {
        // HTLC: Hash-time locked contract
        if (Hash(preimage) != script.GetHashLock()) return false;  // Mismatch
    
        int64_t timeout = script.GetTimeLock();
        if (GetCurrentTime() > timeout) {
            RefundSender();  // Timeout safety
            return false;
        }
    
        // Swap: Transfer DD to buyer, DGB to seller
        TransferDigiDollars(script.buyer, script.amount);
        UnlockCollateral(script.seller);
        return true;
    }

• Tax/Regulatory Risks: Wallet disclaimers and "tax simulation" tools for event estimates (e.g., redemption gains).

  • Rationale: Reinforces "borrow, not sell" while educating; no code changes, just UI/docs.
  • Code Snippet (Simple calc; disclaimer integrated):

    // In wallet.cpp: Tax sim
    double SimulateTaxEvent(double initialPrice, double currentPrice, double amount) {
        double gain = (currentPrice - initialPrice) * amount;
        if (gain <= 0) return 0.0;  // No tax on loss
        return gain * 0.20;  // Example 20% long-term rate; disclaimer: Not advice
    }

Lets build this.