Bitcoin is a complex currency with features like smart contracts. When discussing smart contracts, most people think of Ethereum, Solana, or other blockchain systems rather than Bitcoin itself. However, Bitcoin offers all of this in its original form: the BSV blockchain.
Bitcoin entrepreneur and developer Xiaohui Liu, Founder and CEO of sCrypt Inc., spent his valuable time explaining Bitcoin smart contracts in a two-part video lesson on his YouTube channel.
Xiaohui Liu recently introduced the Ethereum to Bitcoin transpiler, allowing ETH developers to write smart contracts on the BSV blockchain without hassle. Blockchain expert Jerry Chan described the Transpiler as a tool to easily transfer smart contract code written in Solidity to the original Bitcoin script.
Part 1: Bitcoin smart contracts, UTXO model, etc.
Liu begins his video presentation by saying that Bitcoin was meant to have smart contracts all along. As evidence for this claim, Liu cites Satoshi Nakamoto, who said:
The design supports a wide variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third-party arbitration, multi-party signing, etc. If Bitcoin gains momentum, these are things we will want to explore in the future, but they all had to be designed in the beginning to make sure they would be possible later.
The presentation then focuses on Bitcoin’s UTXO model, also in comparison to Ethereum’s account-based system. Liu explains that Bitcoin’s digital transaction system works much like analog cash. When a bitcoin is authorized to be sent, it is only sent once, just like you can only spend money once. Regarding smart contracts, Liu says there is a misconception that Bitcoin is primitive at the code level and therefore unsuitable for multi-layered computational tasks. However, Bitcoin is fully programmable.
Not only is Bitcoin not primitive, but it is the most powerful smart contract platform out there. What do I mean? This basically means that Bitcoin is Turing complete. By Turing complete – in simple terms – it means any smart contract that can be implemented on other blockchains, all executed on any computer (…). Any program you can run on any computer, you can run it on Bitcoin.
When Liu describes these programmable capabilities of Bitcoin, he is talking about Bitcoin SV (BSV) as in the BSV blockchain. In the presentation, Liu explains that BTC cannot execute smart contracts due to code changes made by protocol developers after Satoshi left the project. According to Liu, BTC developers have disabled almost all virtual machine instructions.
The lesson then discusses fascinating features of Bitcoin smart contracts, such as outsourcing computation. Liu gives many examples regarding this idea, all having in common that whoever delivers a computational task will be paid via Bitcoin without needing to trust the other party. Liu also explains how AI/Machine Learning works on and with Bitcoin smart contracts. One of the benefits regarding this area is how Bitcoin can hide certain information in transactions, preserving the privacy of Bitcoin users at scale while allowing automated processes to collect data.
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Part 2: Comparison of Bitcoin smart contracts with other blockchains
In the second lesson, Liu explains that in the fake version of Bitcoin, known as BTC, the Taproot implementation is celebrated as a breakthrough technology. However, Liu demonstrates that Taproot is unnecessarily complex and could be coded to the original Bitcoin in less than 20 minutes, by a single developer. Moreover, the “next big thing in BTC”, called Graftroot, is also discussed by Liu.
What I’m showing here is that you don’t have to wait for several years and hundreds of developers to develop this stuff. You can already code this (…) you can do it today.
Regarding Taproot, Liu mentions the Schnorr Signature update and describes how it wouldn’t have required a Bitcoin change, but could have been coded to Bitcoin in an easier way. Bitcoin inventor Dr. Craig Wright commented on Schnorr Signatures in one of his articles:
Which brings us to the endless push for Bitcoin modifications such as Schnorr’s eponymous signature. It is consistently, if somewhat dishonestly, touted as the solution to privacy issues. The truth is, it’s not a privacy or scaling solution.
This “endless push for changes to Bitcoin” is a serious topic because once you have a Bitcoin smart contract running, you want to make sure it’s still working a few years from now. Changing Bitcoin is a risk to everything built on it, which is why the BSV blockchain strongly advocates an immutable protocol.
In the presentation, Liu compares Bitcoin SV with other blockchain systems such as BCH, Zcash, and Monero. At his company sCrypt, Liu is developing options to run essentially anything other blockchains are able to do directly on the original Bitcoin. The key is to understand that Bitcoin is a “one coin to rule them all” system, which seems diametric to the number of digital assets that are traded in so-called “cryptocurrency” markets today.
The large number of blockchain projects resulted from code changes that crippled BTC. If digital asset users and developers had stuck with the original Bitcoin from the start, there would have been no need for any blockchain other than Bitcoin. With the BSV blockchain, we have reclaimed the original Bitcoin and no longer have any use cases for other blockchains.
Liu ends the presentation by saying that the “more practical” courses are about to be released soon. These two videos are just an introduction to the subject of Bitcoin smart contracts. We can expect to see more informative talks like this on his YouTube channel.
Watch: Xiaohui Liu Lesson 1: Introduction to Bitcoin Smart Contracts (Part 2)
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