Monday, May 29

Bitcoin will have more secure and private smart contracts if this proposal is approved

Bitcoin continues to improve, and this time a proposal has been taken up that aims to improve the way of spending bitcoins (BTC) deposited in a contract.

The concept of smart contracts has been around for years in Bitcoin. They do not have the level of complexity of the contracts that run on the Ethereum network, but they do allow certain payment conditions to be set that indicate how the BTC will be spent.

Among these types of cases there is what is known as pay-to-contract (P2C) or payment to the contract. With P2C, a kind of contract is established between the payer and the receiver, under a public signature. According to the terms of the contract, both parties can confirm that the payment was successful, just by showing its corresponding public key.


However, in this type of payment, the receiver, who owns the UTXO of the payment, needs the hash of the transaction (where it was paid to the P2C) along with his private key in order to spend the BTC. in a new proposal postulated by Maxim Orlovsky, it is sought that the hash be added to a partially signed transaction (PSBT) that will allow to separate the creation process of the transaction (within the P2C contract) and its signature.

In his lectures, Maxin Orlovsky has been a staunch defender of anarchism and the ideology of Bitcoin. Source: Pandora Boxchain – YouTube.

The proposal is based on a postulate made in 2019 by the programmer Andrew Poelstra, for the optimization of P2C payments.

The advantage of this type of improvement, at the user level, is in security and privacy. With a payment through a P2C contract and allowing PSBT signatures, users can spend the received BTC, signing, for example, with hardware wallets, without the need to compromise the private key at any time.

For now, this improvement is only considered a proposal under discussion. It hasn’t even been added to the list of “Bitcoin Improvement Proposals” or BIPs yet.

In the BIP life cycle, after the initial debate, a draft is considered and added to the list of proposals. Subsequently, it is approved or rejected by the community. If approved, a soft fork would be established for its final implementation in Bitcoin.

Smart contracts in Bitcoin increase in complexity

P2Cs are not the first smart contracts to run on Bitcoin, or even the most complex ones. Last year, news broke of how, through discreet logging contracts, or DLCs, oracles were able to run within the network. These could range from sports betting to trading BTC futures contracts.

On the other hand, smart contracts are the basis of the operation of decentralized finance (DeFi, for its acronym in English). Unlike Bitcoin, Ethereum allows the creation of complex contracts thanks to its programming language. However, with Taproot, the Sapio programming language has also arrived, which could open up the possibilities of seeing more complex DeFi platforms in Bitcoin.

For example, Jimmy Song, a prominent programmer in the Bitcoin ecosystem, has talked about how Taproot could enable improvements by conditioning how BTC is spent. New forms of BTC recovery could also be created.