Written by Echo, Infinitas Directed by Hong Shuning

On October 9, Robin Linus, co-founder of blockchain developer ZeroSync, unveiled BitVM’s white paper. “Any computable function can be verified on Bitcoin,” Linus posted on X (formerly Twitter). “This makes smart contracts on Bitcoin more expressive. In particular, it implements features that we believe require a soft fork” – potentially bringing more DeFi use cases and scalability to the network.

BitVM means that Bitcoin can now be Turing-completeness like any other chain: allowing developers to run complex contracts on Bitcoin without changing Bitcoin’s ground rules. Its emergence has sparked buzz by allowing Bitcoin to compete with smart contract platforms such as Ethereum while still maintaining its security and decentralized characteristics.

Previously, a series of protocols for the BTC ecosystem also appeared, such as the Ordinals protocol created by Bitcoin Core contributor Casey Rodarmor, which spawned the first NFT of the Bitcoin network and introduced the concepts of Ordinals and Inions. The Taro protocol, which makes Bitcoin more programmable by introducing a new smart contract language, aims to bring more financial projects to the Bitcoin ecosystem; The RGB protocol, inspired by Peter Todd’s concepts of single-use seal and client-side validation in 2016, also released v0.10 this year, using Bitcoin as the underlying asset and introducing smart contract functionality for Bitcoin students.

The emergence of these protocols has brought new possibilities for the development of the Bitcoin ecosystem. It not only increases the functionality and scalability of the Bitcoin network, but also provides more innovative tools for community members to promote the further development of the Bitcoin ecosystem.

What is BitVM?

BitVM is an abbreviation for “Bitcoin Virtual Machine”. We can envision it as a virtual test lab where developers are free to operate any computing program or execute any smart contract, allowing developers to simulate program behavior without imposing any load or changes on the actual Bitcoin network.

By acting as an intermediate layer, BitVM increases efficiency and reduces the computational burden on the Bitcoin blockchain. For complex calculations or smart contracts, prior to irreversible operations, it is possible to first verify it off-chain. Thus, the system helps maintain the integrity of the blockchain, providing a platform for more complex but secure operations. The roles and workflows in BitVM mainly include:

1. Participants: The operation of BitVM involves two main actors: the prover and the verifier. The prover is the party initiating the calculation or claim, and the verifier is responsible for verifying the claim, and dual-role cross-validation allows for a degree of checks and balances to ensure that the calculation results are accurate and trustworthy.
2. Off-chain computing: BitVM’s ingenuity lies in its handling of compute workloads. Unlike traditional blockchain operations, which place a large computational burden on-chain, most of BitVM’s complex computation is performed off-chain. Off-chain computing provides greater speed and flexibility, reducing the amount of data stored directly on-chain.
3. On-chain verification: The only step BitVM needs to go on-chain is on-chain verification in the event of a dispute, also known as “proof of fraud”. If the validator questions the legitimacy of the prospector’s claim, the system will resolve the issue by referring to the immutable decentralized ledger on the Bitcoin chain. If the prover’s claim proves to be false, the validator can submit a concise proof of fraud to the blockchain, thus revealing dishonest behavior. Balance computing efficiency and robust security with integrated off-chain computation and on-chain validation.

What is the RGB protocol?

RGB is a scalable and confidential Bitcoin and Lightning Network smart contract system developed by the LNP/BP Standards Association, bringing the complex programmability and flexibility of smart contract platforms such as Ethereum to the Bitcoin ecosystem. It adopts the concepts of private and co-ownership and is a Turing-complete, trustless form of distributed computing that does not require the introduction of non-block decentralized protocols for tokens.

RGB is designed to run scalable, robust, and private smart contracts on UTXO blockchains such as Bitcoin, allowing digital assets and smart contracts to bring more functionality to Bitcoin. With RGB, developers can execute complex multi-class smart contracts such as token issuance, NFT minting, DeFi, DAO, and more, enabling continuous stimulation of innovation on top of Bitcoin’s powerful blockchain while maintaining its security. Specific implementation process:

1. RGB Asset Issuance: Allows users to create off-chain contracts to issue RGB assets and assign them to Bitcoin’s UTXOs, thus adding RGB assets to the Lightning Network off-chain payment channel.
2. In-channel transfers: Once added to a payment channel, RGB assets can be transferred and routed between channel participants just like Bitcoin Lightning Network payments, which are completed by client-side verified transfers.

3. “Proof of fraud”: Each time the channel is updated, the asset is sent from the channel multi-signature output to the output created by the Lightning Network promised transaction. This means that if the stale status of the payment channel is broadcast, it is possible to trigger an RGB penalty transaction, taking away all of the attacker’s RGB assets.

BTC ecological next-generation narrative: Who is the best solution?

Combined with the BitVM white paper, BitVM offers the following “new” features for Bitcoin:

1. Ability to implement more complex contracts. Traditional Bitcoin contracts are largely limited to basic operations such as digital signatures and time locks. BitVM offers a large number of new possibilities for contract creation. Users can not only create contracts for financial transactions, but also build contracts for more complex decentralized applications (DApps).
2. Reduces the amount of data that needs to be stored directly on the blockchain. Most of BitVM’s computing work is performed off-chain, improving the overall efficiency of the network, preventing the blockchain from becoming cluttered by unnecessary data, and maintaining the health and speed of the Bitcoin network.
3. Strong fraud protection measures ensure the integrity of transactions. BitVM uses a fraud proof system and challenge response protocols to guarantee that all transactions are honest and transparent. If someone tries to cheat or submit a false claim, the system’s validators can quickly capture and expose the dishonest party by submitting concise evidence of fraud to the blockchain.

But in fact, BitVM has unavoidable limitations

The first limitation is that its design focuses on a “two-party setup” of prover and verifier, meaning that the system is not currently capable of handling multi-party transactions or contracts, limiting the suitability of more complex interactions between multiple participants. This limitation can hinder BitVM’s ability to keep up with emerging needs and expectations.

The second limitation is that the amount of off-chain data storage and computation required is far beyond the capabilities of modern computers, and while off-chain computing helps minimize the impact of BitVM on the blockchain, the huge computational burden makes it virtually impossible and only theoretically feasible.

Concepts such as connecting multiple two-way channels to form a network (similar to Bitcoin’s Lightning Network) have been seen as ways to extend the functionality of a system. We may expect that the RGB protocol that has been given “much hope” can achieve targeted breakthroughs in the limitations of BitVM in the future.

BitVM vs. RGB

Both BitVM and RGB protocols aim to extend Bitcoin’s capabilities, but they have some key differences in design. BitVM emphasizes off-chain computing and fraud protection to ensure contract execution and transaction integrity, while RGB is more focused on privacy.

RGB is designed with a client-side authentication model, which means that when user A sends an asset to user B, user A will not publicly trade on the network, but will send the asset to user B through peer-to-peer transmission. Such a design only requires the use of public networks to prevent double spending.

• BTC nativeness: BitVM requires protocol changes to Bitcoin, while RGB can be implemented with a soft fork
• Full privacy protection: The RGB protocol means that third parties cannot track the history of RGB assets on the blockchain, and only when user B receives the assets, the history of the assets will be known. BitVM can’t do that.
• Commercialization: BitVM puts forward extremely high requirements for computing power and is only theoretically executable. In terms of commercial landing, RGB is superior.

In conclusion, the BitVM idea is full of innovation and imagination, however, based on its current technical framework implementation, it is clear that it is likely to be limited to the concept stage of the white paper in the short term, and there are still great challenges in the exploration of long-term application scenarios and practical applications. In contrast, the RGB protocol has shown a small and fast trend in large-scale commercial applications, and its more mature characteristics. It remains to be seen whether both will be the next generation narrative flashpoints for the Bitcoin ecosystem, and it remains to be seen if other protocols may emerge.

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