The scalability of Bitcoin can be broadly classified into two categories: the mainnet and the off-chain solutions. The mainnet refers to upgrading the original Bitcoin network or extending it based on the mainnet technology, while off-chain solutions involve transferring Bitcoin in a one-way or two-way manner and using another network to scale Bitcoin. Whether it is the mainnet or off-chain solutions, the extension of Bitcoin through smart contracts is one of the core technologies.
According to the current Bitcoin ecosystem, there are three main technical directions for Bitcoin contracts: script technology, smart contracts, and readable financial contracts.
Script Technology
The two main ways the Bitcoin mainnet has been extended are the Lightning Network and Ordinals, but both rely on the upgrade of the Segregated Witness (SegWit) solution. Segregated Witness is essentially a patch technology for the previous flaws in Bitcoin, isolating digital signatures from transactions and storing them separately.
From the perspective of Bitcoin's historical development, the development of the Lightning Network has been a leading factor in driving the adoption of the Segregated Witness upgrade. The Lightning Network relies on time-locked transactions, which require Bitcoin's script technology to be completed. Ordinals function similarly, using the Taproot upgrade to enable more complex transactions to be executed with scripts.
The advantage of script technology lies in its implementation within the Bitcoin network.The main network of Bitcoin does not need to worry about its security. However, the programmability of script technology is greatly limited, and ordinary users cannot understand it at all. In addition, Ordinals and the Lightning Network are respectively NFTs and payment systems, and "both technologies do not have a unified standard and need separate development." Even the byte data generated by Ordinals is essentially invalid data compared to the Bitcoin main network, especially pure speculative behavior can cause congestion in the Bitcoin network, ultimately damaging its decentralization. Smart contracts: Since Bitcoin's script technology is limited, why not directly adopt Ethereum's smart contracts? This brings us back to the UTXO model of Bitcoin, which cannot directly support Turing-complete smart contracts. Therefore, the current main method is to transfer Bitcoin to a sidechain to leverage another network that supports smart contracts to extend Bitcoin. But there are issues with both-way transfers and BTC's centralized management. Even if Bitcoin one-way transfers are adopted, smart contracts themselves also have security risks. This is also the reason why Bitcoin has not actively adopted smart contract technology for a long time. The DAO incident in history is a typical example of security flaws in smart contracts. After the development of Ethereum's DeFi, it is found that smart contract security incidents are constantly happening in the blockchain. Similar events would be disastrous and unacceptable if they occurred in a country's financial system. As an emerging field, Ethereum has been able to survive largely because people have shown more tolerance. So even if smart contracts are adopted on both the Bitcoin main network and non-main networks, Bitcoin's scalability and security issues cannot be avoided. As the digital gold and benchmark project of the cryptocurrency industry, Bitcoin cannot tolerate such defects. Ethereum supports Turing-complete smart contracts and achieves the highest level of technical scalability. However, in addition to security issues, there are also user-friendliness problems, as they can only be used directly by entrusting professional programmers for assistance, which is difficult for ordinary people.
Readable Financial Contract
Hacash has created the technology of readable financial contracts, which achieves utmost flexibility in finance by prioritizing security and user-friendliness. It features the abandonment of non-monetary financial demands, lacks Turing complete programmability, and requires Bitcoin to be transferred to Hacash for usability.
Readable financial contracts adhere to a unified standard. Once a financial contract is accurately verified, it will be uploaded to the Hacash mainnet and can be used repeatedly by users. Different financial contracts based on this standard can be combined freely. Due to the security of each contract and the standardization, there won't be security issues like the combination of smart contracts in DeFi. Moreover, this standard can be understood even without coding experience, enabling ordinary users to generate readable financial contracts by simply selecting and filling in basic values, just like operating traditional financial contracts.
Another significant feature of readable financial contracts is the ability to have off-chain validity. These contracts can sign multiple contracts associated with assets, and these contracts can include mutually exclusive items as arbitration guarantees, leading to certain financial payment guarantees without the need to fully submit these transactions on the mainnet, thus saving block state space.
Summary
For the mainnet of Bitcoin, readable financial contracts and scriptsThe bytes required for this technology are very small, but script technology's bytes may have a lot of meaningless external protocol data, similar to the Ordinal protocol. As for smart contracts, they often require a large amount of space to deploy a set of contract code. At the same time, script technology and readable financial contracts have fewer transactions compared to smart contracts, so the GAS fees required are relatively low. When considering only the impact of contracts themselves on Bitcoin, script technology, smart contracts, and readable financial contracts have made trade-offs in the four dimensions of Bitcoin transactions: security, cost, scalability, and usability. Script technology and readable financial contracts are far superior to smart contracts in terms of transaction security and cost, but the Turing completeness of smart contracts brings the best scalability. Readable financial contracts give up the scalability of other categories and focus on the contract scalability of monetary finance. In terms of usability, readable financial contracts allow people without programming experience to combine and use them freely, while smart contracts and script technology require professional programming experience. The perfect direction for Bitcoin contracts is to achieve absolute security, sufficiently low cost, fully scalable contracts that ordinary users can understand and use without mastering the code. It can be seen that script technology and readable financial contracts continue to make breakthroughs in scalability. Script technology's Ordinals issue recursive inscriptions to enhance the scalability of specific protocols. Readable financial contracts have developed a Layer 3 multi-chain infrastructure based on Hacash to enhance scalability beyond finance. Smart contracts have developed the Move language to increase security. If Bitcoin one-way transfers receive mainstream attention, readable financial contracts may have the opportunity to become the main solution for Bitcoin contract technology extension.
