# BIP-322 Use Cases

###### tags: `Use Cases`

## Original list

* Simple offline use case (sign using a secp256k1 ECDSA or SCHNORR private key)
* Simple bitcoin use case (sign using an bitcoin address, either a spent transaction or is a UTXO)
* Simple identity use case (#w3c did:key?)
* Complex identity use case (#w3c did:btcr2?)
* Use cases for variants such as P2WSH, P2TR, multisig, time lock, and PSBT support.

## In this document

Travel Rule

Address ownership proofs

Audits and proof of reserves

Coin leasing for sabotaging proof-of-reserves schemes

DID stuff

## BIP-322 Use Cases Exploration
These 6 use case drafts below were originally written by Asher Hopp - collaboration, additions, and improvements are welcome! There are several companies I work with which use Bitcoin in their accounting system which have real-world use cases for BIP-322, which are the basis for most of these exploratory use cases. Contact/Questions: @asherhopp on Twitter // @launchwindow on Telegram

**Use Case 1: AML/KYC/PII Verification**
BitcoinExchangeCorp operates in a legal jurisdiction where the government has strict compliance requirements on certain types of financial transactions. In order for BitcoinExchangeCorp to verify who they are doing business with, they issue a challenge phrase consisting of 80 bytes of arbitrary data. BitcoinExchangeCorp’s counterparties use a BIP-322 script signature with the challenge data in OP_RETURN, thus providing a cryptographic identity auth to satisfy local compliance laws. The BIP-322 compliant signature can be permanently recorded in a database as well as any other additional compliance records associated with the transactions.

**Use Case 2: Liquidity Advertisements for Lightning Channels**
Alice has accumulated a substantial amount of bitcoin in her wallet and has decided that she wants to provide liquidity to improve routing and infrastructure of the lightning network. Alice posts a BIP-322 compliant signature on her social media accounts to advertise how much liquidity she is seeking to provide. Bob runs a e-commerce business selling widgets, and is always seeking more inbound liquidity for his lightning node to be able to accept customer payments. Bob sees Alice’s BIP-322 compliant signature confirming her liquidity and reaches out in direct messages to coordinate a channel opening.

**Use Case 3: Decentralized Social Identity**
Alice has been banned from Facebook because she posted too many memes mocking Mark Zuckerberg’s metaverse. Fortunately for Alice, many of her followers know a taproot address on the Bitcoin blockchain which is associated with her identity. Alice decides that she’s not done mocking the metaverse, so she migrates to one of Facebook’s competitors. Alice’s followers are unsure if its actually the “real” Alice on this new account, and demand to see proof before they start sharing her new memes. Alice can’t use Bitcoin’s signedmessage implementation to authenticate her taproot address because it only works on legacy formats, but fortunately BIP-322 signed transactions are compatible with any address format so she can authenticate her control over the taproot address which is already known to be associated with her identity. She continues to mercilessly mock the metaverse.

**Use Case 4: Multisig Proof of Keys**
Alice is a customer of NochainsCapital which provides 3 of 5 mutlisig Bitcoin wallets for their clients. NochainsCapital holds 2 keys, Alice holds one key, Alice’s lawyer holds one key, and Alice’s parents hold one key. For peace of mind, Alice wants to periodically audit the veracity of everyone’s key fragments. Alice asks NochainsCapital to provide a BIP-322 compliant script signed with 2 of 5 keys. Once she has the partially signed script she completes the signature herself, and then separately asks her lawyer and her parents to also provide a signature complete BIP-322 script. Alice verifies all 3 versions of the complete signature, and sleeps soundly knowing that her security scheme is intact.

**Use Case 5: Decentralized Identity Document Integration**
Cube Corporation wants to develop an application for their users which integrates with the Decentralized Identity Foundation’s document specification. Cube Corporation’s suite of decentralized services requires some sort of end-user verification so that peers can have cryptographic confirmation that a counterparty is the same end-user as they’ve interacted with in a different DIF DID-compatible application. Since other companies have already adopted the DIF/DID specification such as Microsoft’s ION project, Cube Corporation decides to integrate an API to verify BIP-322 compliant signed script as a means to verify credentials in the decentralized ecosystem.

**Use Case 6: Quasi-Proof of Reserves**
LSP Corp offers a custodial Bitcoin lightning wallet primarily used for unbanked people in developing nations which lack a strong government-backed financial system. LSP Corp is facing some questions as to whether they actually have the reserves they claim to have -- are the users funds "actually" held in the wallet, or is the company insolvent and lacks sufficient collateral for their end-users wallets? To resolve this issue, LSP Corp offers BIP-322 API access with a JWT token to the governments in the jurisdictions they operate. The API allows anyone with a JWT token to query LSP Corp with a challenge phrase of their choice, and they receive back a BIP-322 signed script from the multisig fund reserves wallet with the challenge phrase in OP_RETURN.