Can Bitcoin Ever Become Smart? –

Key Takeaways

Bitcoins Taprootupgrade laid the groundwork for Ordinals inscriptions. Many in the Bitcoin community expect the network to debut DeFi capabilities and smartcontract functionality directly onto its base layer with cryptographic advancement.

In April, a decentralized blockchain network Internet Computer Protocol (ICP) integrated threshold-Schnorr signatures to allow web3 applications on Bitcoin.

CCN spoke to Lomesh Dutta, Vice President of Growth at Dfinity, a contributor to Internet Computer blockchain, to understand if advancements in Bitcoin can make itsmart.

The Internet Computer Protocol (ICP) recently introducedBitcoinadvancementwhichwill potentially allowit to do more thanjusthandle payments.

During the integration in April, ICP claimed that its programs could interact with Bitcoin directly. It used a cryptographic method called Schnorr signatures.

The threshold-schnorr method can offer potential enhancements toBitcoinsnetwork by increasing efficiency and security, especially for multi-signature transactions. Traditional multi-signature transactions in Bitcoin require each participant to individually sign a transaction, which can be inefficient and costly as it increases the transaction size and potentially the fees. Threshold-Schnorr simplifies this by allowing a single signature to represent a transaction approved by multiple parties.

Dutta explains,Bitcoin uses twodifferentdigital signature cryptographic schemes: ECDSA and Schnorr. In themost simpleterms, a digital signature proves that the owner of the funds has authorized the spending of those fundsi.e.if you have to send your Bitcoin to someoneelseit needs to be digitally signed by you (using your private key).

Dutta states that a lot of recent developments onBitcoin, including digital assets and features, are using Schnorr signatures.According to him, ICP is also adopting threshold Schnorr signatures to allow it to manage various types of Bitcoin-related activitiessecurely.

The VP adds,This means that you can build any form of advanced smart contracts on Bitcoin involving these assets (BRC-20, Runes, Ordinals, ARC-20, etc.) in an extremely secure way with 1-2s transaction finality andextremely lowgas fees (fee could even be paid by developers, so bitcoin smart contract transactions can even become free for end users).

When it comes tosmart contracts capabilities, Bitcoinwas never consideredto be on the list. Ethereum became the firstsmartchainfollowed by other players like Solana and Cardano.

Dutta points out that while Bitcoin is a highly recognized and widely used cryptocurrency, itwasntcreatedwith the capability to support smart contracts directly. He adds thatBitcoinssystem has inherent limitations such as slow transaction processing, limited ability to handle large volumes of transactions, and highcosts associated with transactions. Therefore, it is less practical for developerstoeffectivelybuild and operate applications directly onBitcoinsplatform.

According to the Dfinity VP, ICP is being used to address some ofBitcoinslimitations. Firstly, ICP claims to check how much Bitcoin someone has and can also authorizeBitcointransactionsdirectly,without needinga middleman.

Thismeans ICP can potentially manage, send, and receiveBitcoinand other Bitcoin-based digital items. Secondly, ICP claims to provide an environment for creatingsmartcontracts by supporting developers and overcoming its design limitations around transaction speed, scalability, and costs.

When we asked Dutta what it could mean for Bitcoin, he said,It enables a plethora of use cases that have never been possible on Bitcoin earliersuchas decentralized exchanges (DEXs) offering BTC or BRC20 trading pairs, lending markets using Ordinals as a collateral, decentralized fundraisers accepting BTC, or Web3 SocialFi services allowing satoshis tobe sentvia chat messages!

According to Dutta, recent developments like Ordinals and BRC-20 tokensare designedto add new functions to Bitcoin, allowing it to handle different types of transactions and services.

More transactions also mean higher revenue for minerswhichis critical for the long-term security of Bitcoin (instead of simply relying on the assumption that price will continue to skyrocket),he added.

The answer to the question is No. Bitcoin itselfisntbuiltto function asa smartcontract platform. Bringingsmartcontract functionalities directly toBitcoinsbase layerisntstraightforward due to its design and the census challenges within the community.

Therefore, sidechains like RSK andLayer 2 solutionslike the Lightning Network bring additional functionalities to Bitcoin.

Dutta agrees thata smartBitcoin is a far-fetched idea when he says,Wedontneed to change Bitcoin to enable these functionalities. As a matter of fact it would be subject to major political and controversial debates if one were to implement changes in the core bitcoin architecture.

The VP suggests that to enablesmartcontract functionalities for Bitcoin,itsbetter to use separate systems rather than changingBitcoinscore structure.

The executive explains that the systems operate alongside Bitcoin without the need formiddlemen, relying only on thesecurity of theblockchainsthemselves.He highlights a current issue where some groups use insecure, centralized methods, known as bridges, to add functionalities to Bitcoin.

Dutta notes,Our biggest goal should be tostay away fromthese insecure bridges, a model that has lost billions of dollars for users.

Looking forward, Dutta dubsBitcoinand interoperability as two major themes. He states,Bitcoin is the most popular digital asset, with the most liquidityanditwill continue to be a dominant force in the web3 space.

Dutta pointed out that different blockchains have distinct features that make them useful for specific purposes.For example, Ethereumis often usedas a platform for executing and recordingcontracts and transactions.He emphasizes that Bitcoin, with its unique properties and recognition, will continue to beimportantand should be able to work in conjunction with other blockchains.

The goal for the blockchain industry is to achieve this interoperability in the most secure manner possible.Thiswill bring the trust of end users to our industry,Dutta added.

Advanced cryptographic techniques, such as threshold-Schnorr signatures,are enhancingBitcoinscapabilities. However, it is not directly on its core layer.

While Bitcoinitselfdoes not support these advanced functions natively due to its original design limitations, new technologiesare allowingsecure interactions with Bitcoin without intermediaries.Dutta highlights that these integrations enable the creation of smart contracts on platforms linked to Bitcoin, which can make transactions quicker and more cost-effective.

However,Bitcoinitselfcannot transform intoa smartcontract platform at this stage. Yet, these external advancements are vital as they circumventBitcoinsinherent constraints. By leveraging sidechains and Layer 2 solutions, Bitcoin can extend its functionalitywellbeyond its traditional role asdigital gold,supporting a broader array of applications.

Was this Article helpful? Yes No

Go here to read the rest:

Can Bitcoin Ever Become Smart? -

Related Posts

Comments are closed.