Decentralized Transaction Merging: A New Opportunity for Ethereum

As the world’s largest smart contract platform, Ethereum has long been known for its complexity and limitations. For users who require more flexibility in their transactions, a new feature is emerging: decentralized transaction merging (DTM). In this article, we’ll see if it’s possible to merge two separate transactions into one using only their signatures.

Backstory

Ethereum’s current consensus algorithm, Proof of Work (PoW), has long been the standard for verifying and adding transactions to the blockchain. However, as the network grew, scalability became a pressing issue. Traditional solutions relied on complex cryptographic techniques, such as multi-signature wallets or hierarchically deterministic (HD) wallets, to ensure secure and efficient transaction merging.

Signatures: The Key to Merging Decentralized Transactions

Signatures are a fundamental concept in cryptography, used to confirm user identity and verify transactions. In traditional PoW systems like Ethereum, signatures serve as a means to verify transactions and create new blocks on the blockchain. However, they also introduce important limitations to merging decentralized transactions.

Two separate transactions with a single signature

Suppose we have two valid transactions, A and C:

1) A -> B

2) C -> D

Each of these transactions has its own set of inputs (A, B) and outputs (C, D). We want to combine them into a single transaction that uses only their signatures. In theory, this is possible using a cryptographic technique called “signature merging.”

Signature Merging: Theoretical Foundations

In Ethereum, signature merging involves combining two or more signatures to create a new one. However, the basic mathematical principles and assumptions have not yet been explicitly defined.

Our proposal to combine A and C into a single transaction uses the following steps:

• Create a new public key for the merged transaction.

• Use signature A as input and produce an output with a value equal to the sum of the values ​​obtained by all inputs of A multiplied by some constant (k).

• Use signature C as input and create an output with a value equal to the sum of the values ​​obtained by all outputs of C multiplied by some constant (l).

Code Example

To illustrate this concept, we will use Python code to demonstrate how to merge two transactions using signature merging:

“python

import hashlib

import json

def combine_transactions(transaction1, transaction2):

Create new public keys for the merged transaction

combined public key = hashlib.sha256((transaction1[‘input’] + transaction2[‘output’]).encode()).

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