On the BitVM and Innovating on Bitcoin
There’s no easiest way to doxx yourself as a crypto noob than commenting on Bitcoin developments.
I have read a lot of preposterous analyses on the BitvM.
Let’s make some clarity.
A failure to understand the value proposition of Bitcoin is a failure to have a broader understanding of the Web3 ecosystem.
Before diving into the BitVM, it's important to mention that Bitcoin design is a feature and not a bug.
The Bitcoin language is purposely limited in order to maximize security and decentralization, over code flexibility (which is something implemented with Ethereum).
1️⃣ What is the BitVM?
The BitVM is a revolutionary solution bringing Turing-complete smart contracts directly to Bitcoin.
With this VM, Bitcoin is not used to "execute" code directly, but only to "verify" the execution: it doesn't allow code execution on Bitcoin (due to scalability and practical issues), BUT it allows users to "publish proofs that a script has been executed (off-chain) incorrectly".
It can be interpreted similarly to optimistic rollups on Ethereum: the BitVM can create proof of incorrect execution in case of fraud or misdemeanor.
This is very compact in byte size, as it only requires the on-chain publication of the code where the error is occurring.
The value proposition of the BitVM is therefore to allow Bitcoin to run smart contracts without the need to go through a soft or a hard fork.
Currently, it's not clear which case studies will be enabled by the BitVM, as more research needs to be conducted.
Some include:
🌉 Trustless Bridges
🔮 Prediction Markets
💻 New Op_Codes
2️⃣ How does BitVM work in practice?
BitVM leverages Taproot addresses so that the space used is minimized.
BitVM contracts involve two parties, a Verifier and a Prover:
• They both deposit Bitcoin in a Taproot Address (2-of-2 multisig)
• They begin a sequence of pre-signed transactions where the Verifier proposes a Challenge and the Prover will respond with a solution
• Challenge > Response > Challenge, and so on
If the Prover can respond correctly to all challenges, then they will be able to access the deposited Bitcoins ✅
If the Prover fails, the Verifier can take the Bitcoins put at stake by the Prover ❌
Only in case of dispute between them, do the Challenge-Response transactions get posted on-chain on Bitcoin.
Otherwise, the transactions can be settled off-chain.
3️⃣ Food for Thought
The BitVM is an exciting innovation, opening the door for introducing smart contracts without the need for hard forks, as most computations happen off-chain.
But hold your horses...
While BitVM is by any means an interesting design, it is much harder to implement practically as it requires a lot of interactions between the parties.
The off-chain data required will likely grow to the extent that it will not be manageable.
Also, the BitVM contracts are currently limited to two parties, further limiting the use cases.
Nonetheless, the BitVM is a welcomed innovation, showing that new developments on Bitcoin are feasible, as long as they preserve and prioritize the safety of the chain.