Midnight Core Conceptsarchitecture

Transaction Anatomy

Every Midnight transaction contains:

Transaction {
  guaranteed_zswap_offer,    // Required: token operations
  fallible_zswap_offer?,     // Optional: may-fail token ops
  contract_calls?,           // Optional: contract interactions
  binding_randomness         // Cryptographic binding
}

Guaranteed vs Fallible

Use case: Guaranteed section collects fees. Fallible section attempts swap. If swap fails, fees still collected.

Building Blocks

1. Zswap Offers

Token movement layer:

Offer {
  inputs: Coin[],      // Spent coins (nullifiers)
  outputs: Coin[],     // Created coins (commitments)
  transient: Coin[],   // Created and spent same tx
  balance: Map<Type, Value>  // Net value per token
}

2. Contract Calls

Computation layer:

ContractCall {
  guaranteed_transcript,     // Visible effects
  fallible_transcript,       // May-fail effects
  communication_commitment,  // Cross-contract (future)
  zk_proofs                  // Validity proofs
}

3. Cryptographic Binding

All components bound together via:

• Pedersen commitments - Homomorphic value binding
• Schnorr proofs - Contract contribution carries no hidden value
• ZK proofs - Transcript validity

Transaction Integrity

Homomorphic Commitments

Midnight extends Zswap's Pedersen commitment scheme:

Commitment(v1) + Commitment(v2) = Commitment(v1 + v2)

This allows verifying total value without revealing individual values.

Binding Mechanism

Transaction binding ensures:
1. Zswap values balance (inputs = outputs + fees)
2. Contract effects match proofs
3. All components cryptographically linked
4. No value created from nothing

State Architecture

Ledger Structure

Ledger {
  zswap_state: {
    coin_commitments: MerkleTree,
    free_slot_index: Index,
    nullifier_set: Set<Nullifier>,
    valid_roots: Set<MerkleRoot>
  },
  contract_map: Map<Address, ContractState>
}

Contract State

ContractState {
  public_fields: Map<Name, Value>,
  merkle_trees: Map<Name, MerkleTree>,
  sets: Map<Name, Set>
}

Execution Flow

Transaction Processing

1. Well-formedness Check (stateless)
   ├─ Format validation
   ├─ ZK proof verification
   ├─ Schnorr proof verification
   ├─ Balance verification
   └─ Claim matching

2. Guaranteed Execution (stateful)
   ├─ Contract lookups
   ├─ Zswap offer application
   ├─ Contract call execution
   └─ State persistence

3. Fallible Execution (stateful, may fail)
   ├─ Similar to guaranteed
   └─ Failure doesn't revert guaranteed

Contract Call Execution

For each contract call:
1. Lookup contract state
2. Verify ZK proof against circuit
3. Execute Impact program
4. Verify effects match declared effects
5. Update state

Merging Transactions

Zswap enables atomic composition:

Tx1 (Party A)     Tx2 (Party B)
     ↓                 ↓
     └─────┬───────────┘
           ↓
    Merged Transaction
    (atomic, all-or-nothing)

Merging Rules

• At least one tx must have empty contract calls
• Values must balance when combined
• Proofs remain independently valid

Address Derivation

Contract Address = Hash(deployment_data)
Token Type = Hash(contract_address, domain_separator)
Coin Commitment = Pedersen(type, value, owner, randomness)
Nullifier = Hash(commitment, owner_secret)

Component Integration

How Tokens Flow

User Wallet                    Contract
    │                              │
    │ ──── Zswap Input ────────→  │  (spend coin)
    │                              │
    │ ←─── Zswap Output ───────── │  (receive coin)
    │                              │
    │ ──── Contract Call ──────→  │  (invoke logic)

How Privacy Works

Private Domain          Public Domain
──────────────          ─────────────
User secrets     ──ZK Proof──→  Transcript
Local state                     State changes
Merkle paths                    Nullifiers
Witness data                    Commitments

Practical Patterns

Simple Value Transfer

1. Construct Zswap offer
   - Input: Your coin (create nullifier)
   - Output: Recipient coin (create commitment)
2. Balance must be zero (minus fees)
3. Generate ZK proof
4. Submit transaction

Contract Interaction

1. Prepare witness data (private inputs)
2. Construct contract call
3. Generate ZK proof (proves valid execution)
4. Optionally combine with Zswap offers
5. Submit transaction

Atomic Swap

1. Party A: Create partial offer (gives TokenX)
2. Party B: Create partial offer (gives TokenY, wants TokenX)
3. Merge offers off-chain
4. Submit merged transaction
5. Both transfers atomic

References

For detailed technical information:

• references/transaction-deep-dive.md - Complete transaction structure
• references/state-management.md - Ledger operations, state transitions
• references/cryptographic-binding.md - Pedersen, Schnorr, proof composition

Examples

Working patterns:

• examples/transaction-construction.md - Building transactions step by step