International Association
for Cryptologic Research

This paper presents FLEX (Fraud proofs with Lightweight Escrows for eXits), a garbled circuit-based protocol designed to facilitate two-party disputes on Bitcoin without requiring permanent security bonds. FLEX enables conditional security deposits that are only activated in the event of a dispute, reducing the financial overhead for both parties. The main goal of FLEX is to improve the capital efficiency of BitVM-based bridges in a permissioned challenge setting but can also be used to improve the security of any other fraud proof-based protocol such as payment channels. The paper also introduces enhancements that allow faster reimbursements in scenarios where one party's node is unavailable, while preserving security and minimizing race conditions.