did:btcr

The Bitcoin Reference (BTCR) DID Method is a minimalist approach to implementing decentralized identifiers using the Bitcoin blockchain. This method leverages Bitcoin's security and immutability to create DIDs that are particularly suited for anonymous and pseudo-anonymous identities, with a focus on minimal personal information disclosure.

The method creates DIDs by recording transactions on the Bitcoin blockchain, where each DID is represented by a transaction reference (TxRef). The system supports two modes of operation:

• Basic DIDs with default capabilities derived from the transaction itself
• Enhanced DIDs that reference additional information through an OP_RETURN field

Key features include:

• Trust anchoring directly on the Bitcoin blockchain
• Public auditability of all updates via blockchain transactions
• Zero PII (Personally Identifiable Information) on-chain
• Web-of-trust style identity management
• Strong security inherited from Bitcoin's consensus mechanism

While the method provides robust security, it has practical scaling considerations:

• Transaction costs for updates
• UTXO (Unspent Transaction Output) inflation
• Potential blockchain bloat

Technical Implementation:

1. DID Generation and Structure:

• Format: did:btcr:<TxRef>
• TxRef encoding includes:
  • Chain identifier
  • Block height
  • Transaction index
  • Optional outpoint index

2. Resolution Process:

1. Extract transaction references from DID
2. Look up transaction on Bitcoin blockchain
3. Check if outpoint is spent
4. Follow transaction chain if needed
5. Generate or retrieve DID Document

3. Key Management:

• Uses EcdsaSecp256k1VerificationKey2019
• Supports multiple key types:
  • Authentication keys
  • Assertion keys
  • Additional keys via continuation documents

4. Security Features:

• Transaction-based verification
• Cryptographic binding to Bitcoin addresses
• Key rotation through transaction chain
• Revocation through spending outputs

5. Technology Stack:

• Bitcoin blockchain as foundation
• BIP-0136 for transaction references
• JSON-LD for DID Documents
• HTTP for continuation document retrieval
• Bech32 encoding for TxRef format

The method implements a unique "follow-the-tip" mechanism for:

• DID updates
• Key rotation
• Document versioning
• Revocation status checking