Technology

Debunking the ‘Bitcoin Cannot Do Smart Contracts’ Myth

The main selling point of systems like Ethereum and EOS is their ability to execute smart contracts, at least according to the supporters of those projects. To them, Bitcoin is simply too limited and conservative, and new approaches are needed to unlock the true power of blockchain technology.

Of course, this is not technically true. While Bitcoin’s scripting language is much less expressive than Ethereum’s (for example), it’s possible to write certain types of smart contracts on Bitcoin as it exists today. Three examples of applications of Bitcoin smart contracts include: Bitcoin’s often-hyped Lightning Network; the recently announced Arwen protocol, which dramatically increases security for traders on exchanges; and Abra, which allows users to peg the value of their bitcoin to many other real world assets.

Multisig addressing is another example of a smart contract, and former Bitcoin Core lead maintainer Gavin Andresen once argued most of what Ethereum is useful for can already be done with Bitcoin’s multisig functionality today. In fact, Andresen wrote about this a little over a year before Ethereum officially launched.

This topic of whether Bitcoin is useful for smart contracts came up during Casa CTO Jameson Lopp’s recent interview with Epicenter. While sharing his thoughts on the matter, Lopp discussed his view of Bitcoin as a trust anchor, how more expressive smart contracts can be implemented in Bitcoin, and Bitcoin protocol developers’ conservative approach to their work.

Bitcoin as a Trust Anchor

The discussion around Bitcoin’s usefulness for smart contracts came out of a question from Epicenter co-host Brian Fabian Crain around the general utility of the Bitcoin network. Lopp was asked to explain his thoughts on whether Bitcoin should be utilized for payments, the “digital gold” use case, trustless computing, or something else.

In his response, Lopp noted that most of his thoughts related to this question can be found in a CoinDesk article he wrote around the idea of Bitcoin as a trust anchor.

“I do think that there is more to [Bitcoin] than just money. I think what we’re trying to do is create this global record of truth — or at least an authoritative record that has no authority behind it,” said Lopp.

The Casa CTO added that people are able to put whatever data they wish in this authoritative record, and he provided specific examples of how this can be done.

“If you’re moving beyond the simple accounting ledger that the Bitcoin protocol supplies, you have to basically create your own protocol, your own new consensus, for whatever that extension is. Whether that is some sort of layer-two network or a sidechain that is pegged to Bitcoin or extension blocks or whatever — there’s a potentially limitless number of ways to do this,” explained Lopp.

Lopp mentioned VeriBlock, which currently accounts for around 20% of all daily Bitcoin transactions, and RSK, which is an Ethereum-esque sidechain to Bitcoin, as two examples of new protocols created through Bitcoin anchoring.

Smart Contracts on Bitcoin

When it comes to smart contract-functionality specifically, Lopp expanded on his thoughts related to RSK.

“They’re taking that smart contracting language from Ethereum, and they’ve created this sidechain that is pegged to Bitcoin. So, you can kind of have the best of both worlds. Whether that ends up being highly-adopted, nobody knows,” said Lopp.

In terms of Bitcoin’s future potential as a platform for smart contracts, Lopp pointed out that there are plenty of Bitcoin developers who are interested in this sort of functionality. However, they disagree with how Ethereum went about doing things. According to Lopp, it comes down to a debate of execution versus verification.

“A lot of the ‘more conservative” Bitcoin developers don’t like having smart contracts that have to get executed by everyone on the network. They rather want to perform the same type of logic but where the actual execution happens privately, and then you’re just providing a proof of the execution that the rest of the world can verify,” explained Lopp.

Lopp went on to mention Merkalized Abstract Syntax Trees (MAST), Taproot, and Simplicity as examples of how more expressive smart contracts may work on Bitcoin in the future; however, he added that it’s up in the air in terms of when this sort of stuff will be as easy for developers to use as something like Ethereum’s solidity or viper languages.

Bitcoin’s Conservative Approach to Protocol Changes

And this gets into a key difference between Bitcoin and all of the other crypto asset networks out there: alterations to the Bitcoin protocol tend to come at a slower pace.

“Advancements with the Bitcoin base protocol [are] a lot more measured and slower than a lot of other chains for a number of reasons,” said Lopp.

Blockstream mathematician Andrew Poelstra recently explained the reasoning behind Bitcoin developers’ conservative approach to protocol-level changes on an episode of Monero Talk.

Due to this slow and steady approach to development, Epicenter co-host Sébastien Couture asked if Lopp thought it’s possible that the developer network effects around something like Ethereum will grow too strong before it’s easy to build more expressive smart contracts on Bitcoin. Lopp pointed to the economic network effects around Bitcoin in his response:

“[Bitcoin maximalism] tends to be, I think, more economic thoughts of how these types of systems play out rather than a blind belief that Bitcoin was first and it must be the best and will never be superceded yatta, yatta, yatta. There’s definitely plenty of potential for other systems to get greater adoption and surpass Bitcoin or somehow be an order of magnitude more utilitarian than Bitcoin is and therefore supercede its network effects. I don’t think anything is set in stone, for sure. There’s going to be a lot of competition for the foreseeable future.”

In the past, Lopp has also written about his own struggles with Ethereum as an engineer at BitGo.

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The Case for Universal Basic Income Gains Strength As Recession Fears Deepen

Britain’s protracted and problematic Brexit from the European Union, coupled with China’s falling exports and America’s record trade deficit, has deepened fears of a recession at the start of 2019.

Those looking beyond the doom and gloom believe the case for universal basic income (UBI) is getting stronger by the day – and now technological advancements are making it a viable option, moving it from theory to reality.

UBI is a revolutionary economic concept whereby every individual is granted a fixed, minimum wage to cover basic needs. With the threat of global financial crisis, projects that explore distribution mechanisms to assist the poorest in society are gaining interest and support.

For instance, GoodDollar, a research hub that is experimenting how decentralised cryptocurrencies and blockchain technology may enable models based on UBI with the central aim of reducing global wealth inequality, is generating interest from all over the world.

In mid-January, French crypto-finance website VideoBourse spoke at length with Yoni Assia, eToro Co-Founder and Chief Executive, who launched GoodDollar at Web Summit in Lisbon in November 2018.

(GoodDollar’s official launch)

“GoodDollar is a non-profit project eToro is supporting,” said Mr Assia in the VideoBourse interview, acknowledging that his multi-asset investment platform has committed an initial $1 million. “The idea behind GoodDollar was that there needs to be a disruption to how money is being distributed and generated.

“One of the biggest issues in the world is a very simple thing: the rich get richer and poor get poorer. That leads to a growing inequality in society, and eventually that leads to very bad things. The way the system works leads to inequality – it’s how money is being distributed, and how money is being generated.”

Mr Assia explained: “For example, let’s assume interest rate plus inflation is 10 per cent a year. We know that 10 per cent of the global population own 90 per cent of the wealth. So 9 per cent of the 10 per cent generated in interest rates would go to the richest 10 per cent. Meanwhile, the remaining 1 per cent would go to the other 90 per cent of the population.

“That’s basically just because of how interest rates and inflation work, and that is because money has never been on the blockchain. If you could create mechanics within cryptocurrency that creates better wealth distribution potentially you could improve significantly inequality. By making the world more equal then more people can participate in the economy.”

Hence the launch of GoodDollar. In the months leading up to the announcement at Web Summit, a growing team of digital pioneers, economists and builders started experimenting and exploring what might be possible in this space, at the intersection between UBI and blockchain. The early momentum has been very encouraging.

In late November, GoodDollar helped establish an OpenUBI ecosystem with a number of other partners. The OpenUBI was launched to foster collaboration and discussion around UBI and its technological implementation. There is an OpenUBI meet-up in Berlin at the end of January, and in February there will be a GoodDollar hackathon event at eToro’s Israel office.

“A lot of our efforts are going into researching how to build GoodDollar in a purely decentralised way,” Mr Assia continued in his VideoBourse interview. “On the one hand we’re trying to build a simple user interface so people can connect to it … on the other hand we want to build something that’s truly decentralised. We understand that for something like this to succeed, it needs to scale on a much wider scale than eToro.”

After a positive first few months, there are many more exciting things to look forward to in 2019 for the GoodDollar project. Mr Assia, who will be speaking at Paris Fintech Forum 2019 later in January, revealed that “we’ll be launching the first GoodDollar experiment within the next six to nine months”.

He added: “We definitely look at this as something that’s experimental, based on code and a lot of research that we’re doing. We have a few academics on the team, and experts in legal and regulation and economics.

“I am a very big believer in a new type of innovative asset – like GoodDollar – that creates a paradigm shift in terms of how we think about money, and how money is being generated.”

As the markets remain volatile and global financial uncertainty looms, projects like GoodDollar could well revolutionise how money is distributed at scale – and sooner rather than later.

Join GoodDollar. The project needs builders, scientists and experts in identity, privacy, and financial governance, as well as philanthropists and ambassadors. Email GoodDollar at hello@gooddollar.org, contact us via our social media channels (Twitter and Telegram), or join the OpenUBI movement.