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- 1 BitVM is a framework for expressive Bitcoin contracts and computations
- 2 It creates a trust-minimized system and not a trustless system, unlike Bitcoin
- 3 BitVM leverages a proof system and is inspired by the Optimistic rollups
BitVM is the short form of a Bitcoin virtual machine. Bitcoin’s native smart contract capabilities are limited to basic operations like signatures, timelocks, and hash locks. However, BitVM introduces a novel framework for more expressive Bitcoin contracts and off-chain computation.
The application of the protocol includes games like Chess, Go, and Poker, verifying validity proofs in Bitcoin contracts, bridging BTC to foreign chains, building prediction markets, and emulating novel opcodes.
A notable limitation is that BitVM operates only in a two-party setting, requiring significant off-chain computation and communication.
The protocol architecture is inspired by Optimistic Rollups and the MATT proposal. It leverages fraud proofs and a challenge-response protocol without altering Bitcoin’s consensus rules.
The prover commits to a program bit-by-bit, which the verifier can succinctly disprove through pre-signed challenge-and-response transactions. This approach enables universal computations on Bitcoin.
Source: Bitvm.org
The core component is the bit value commitment, where the prover sets a bit’s value by revealing preimages of hashed values. This commitment is binding and prevents equivocation, as revealing both preimages results in the verifier taking the prover’s deposit. Combining bit value commitments with timelocks ensures timely resolution.
Source: Bitvm.org
BitVM uses NAND gates to represent any computable function as a Boolean circuit. Each logic gate commitment is expressed in a Taproot address, minimizing the on-chain footprint. The verifier can challenge any incorrect claim through a sequence of pre-signed transactions, forcing the prover to reveal gate commitments.
What are the Limitations of BitVM?
Firstly, BitVM facilitates the creation of trust-minimized systems rather than truly trustless ones. A 1-of-N trust assumption persists, requiring at least one honest verifier to challenge attempted fraud. Fraudulent transactions could be posted on the Bitcoin chain if all verifiers were undermined.
Fortunately, there is no upper limit on the number of verifiers in the network. Anyone can act as a verifier, and as more verifiers participate, the 1-of-N trust assumption becomes more robust, enhancing system security.
Another challenge is the potential complexity of BitVM. Taptrees could contain billions of leaves and require numerous pre-signed transactions, each several hops long, to ensure accurate settlement. Developing with BitVM necessitates programming at the lowest level, involving countless components to construct a higher-level programming language or even a zero-knowledge verifier.
Currently, BitVM supports only a two-party model, limiting its applicability to multi-party smart contracts. Consequently, most applications would need to be developed on Layer 2 solutions, with proof verification occurring on Bitcoin’s Layer 1.
What does the future hold for BitVM?
BitVM is a Bitcoin virtual machine introducing a new framework for advanced smart contracts and off-chain computation. Its limitations include trust-minimized rather than truly trustless systems, potential complexity, and support for only a two-party model. Currently, the protocol is in a preliminary stage, but it would be interesting to see how it pans out.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or any other advice. Investing in or trading crypto or stock comes with a risk of financial loss.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
