New Ideas for Smart Contracts in the Bitcoin Ecosystem

Bitcoin, as the currently most liquid and safest blockchain, has attracted a large number of developers after the inscription craze. They quickly focused on Bitcoin's programmability and scalability issues. By introducing solutions such as ZK, DA, sidechains, rollups, and restaking, the Bitcoin ecosystem is迎来新的繁荣高峰, becoming the main focus of the current bull market.

However, many designs have adopted the scalability experience of smart contract platforms like Ethereum, and often rely on centralized cross-chain bridges, which has become a potential weakness of the system. Few solutions are designed based on the characteristics of Bitcoin itself, which is related to the unfriendly development experience of Bitcoin. Bitcoin is difficult to run smart contracts like Ethereum for the following reasons:

1. The Bitcoin scripting language limits Turing completeness for security reasons, making it unable to execute complex smart contracts.
2. Bitcoin blockchain storage is designed for simple transactions and is not optimized for complex smart contracts.
3. Bitcoin lacks a virtual machine for running smart contracts.

The SegWit in 2017 with the isolation witness ( expanded the Bitcoin block size limit; the Taproot upgrade in 2021 made batch signature verification possible, speeding up transaction processing. These advancements created conditions for the programmability of Bitcoin.

In 2022, developer Casey Rodarmor proposed "Ordinal Theory," outlining a numbering scheme for Satoshis that allows arbitrary data to be embedded in Bitcoin transactions. This opened up new avenues for directly embedding state information and metadata on the Bitcoin blockchain, providing new ideas for smart contract applications that require accessible and verifiable state data.

Currently, most projects that extend Bitcoin's programmability rely on layer two networks (L2), which requires users to trust cross-chain bridges, becoming a major obstacle for L2 to acquire users and liquidity. Additionally, Bitcoin lacks a native virtual machine or programmability, making it impossible to achieve communication between L2 and L1 without increasing trust assumptions.

RGB, RGB++, and Arch Network attempt to enhance the programmability of Bitcoin by starting from its native properties, providing smart contracts and complex transaction capabilities through different methods:

1. RGB is a smart contracts solution verified through off-chain clients, which records the state changes of smart contracts in the UTXO of Bitcoin. Although it has certain privacy advantages, it is cumbersome to use, lacks contract composability, and develops slowly.

2. RGB++ is another extension based on the RGB concept, still based on UTXO binding, but treats the chain itself as a consensus client validator, providing a metadata asset cross-chain solution that supports the transfer of any UTXO structure chain.

3. Arch Network provides a native smart contracts solution for Bitcoin, creating a ZK virtual machine and validator node network, and records state changes and asset records in Bitcoin transactions through aggregated transactions.

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RGB

RGB is an early smart contracts extension idea in the Bitcoin community, which encapsulates state data through UTXO, providing important ideas for subsequent native expansion of Bitcoin.

RGB adopts an off-chain verification method, transferring token transfer verification from the Bitcoin consensus layer to off-chain, validated by specific transaction-related clients. This reduces the need for global broadcasting, enhancing privacy and efficiency. However, this privacy enhancement method is also a double-edged sword. Allowing only specific transaction-related nodes to participate in verification enhances privacy but leads to third-party invisibility, making operations complex and difficult to develop, resulting in a poor user experience.

RGB introduces the concept of single-use seals. Each UTXO can only be spent once, equivalent to being locked at creation and unlocked at spending. The state of smart contracts is encapsulated by UTXOs and managed by seals, providing an effective state management mechanism.

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RGB++

RGB++ is another extension based on the RGB concept, still based on UTXO binding.

RGB++ utilizes Turing-complete UTXO chains (such as CKB or other chains) to handle off-chain data and smart contracts, further enhancing Bitcoin's programmability, and ensures security through isomorphic binding of BTC.

RGB++ uses a Turing-complete UTXO chain. By using a Turing-complete UTXO chain like CKB as a shadow chain, RGB++ can handle off-chain data and smart contracts. This chain not only executes complex smart contracts but also binds with Bitcoin UTXOs, increasing system programmability and flexibility. The isomorphic binding of Bitcoin UTXOs and shadow chain UTXOs ensures consistency of states and assets between the two chains, guaranteeing transaction security.

RGB++ extends to all Turing-complete UTXO chains, no longer limited to CKB, enhancing cross-chain interoperability and asset liquidity. This multi-chain support allows RGB++ to integrate with any Turing-complete UTXO chain, increasing system flexibility. At the same time, the implementation of bridge-less cross-chain through UTXO isomorphic binding avoids the "fake coin" problem, ensuring asset authenticity and consistency.

On-chain verification through shadow chains simplifies the client validation process for RGB++. Users only need to check transactions related to the shadow chain to verify the correctness of the RGB++ state computation. This on-chain verification method not only simplifies the validation process but also optimizes the user experience. By using a Turing-complete shadow chain, RGB++ avoids the complex UTXO management of RGB and provides a more streamlined and user-friendly experience.

Arch Network

The Arch Network mainly consists of the Arch zkVM and the Arch validator node network, utilizing zero-knowledge proofs and a decentralized verification network to ensure the security and privacy of smart contracts. It is more user-friendly than RGB, without the need to bind to another UTXO chain like RGB++.

Arch zkVM uses RISC Zero ZKVM to execute smart contracts and generate zero-knowledge proofs, which are verified by a decentralized network of validating nodes. The system operates on the UTXO model, encapsulating the state of smart contracts in State UTXOs to enhance security and efficiency.

Asset UTXOs are used to represent Bitcoin or other tokens and can be managed through delegation. The Arch validation network verifies ZKVM content through randomly selected leader nodes, using the FROST signature scheme to aggregate node signatures, and finally broadcasts the transaction to the Bitcoin network.

Arch zkVM provides a Turing-complete virtual machine for Bitcoin, capable of executing complex smart contracts. After each contract execution, Arch zkVM generates zero-knowledge proofs to verify the correctness of the contracts and the state changes.

Arch also uses the Bitcoin UTXO model, where states and assets are encapsulated in UTXOs, allowing state transitions through the concept of single use. The smart contract state data is recorded as state UTXOs, while the original data assets are recorded as Asset UTXOs. Arch ensures that each UTXO can only be spent once, providing secure state management.

Although Arch has not innovated the blockchain structure, it requires a network of validating nodes. During each Arch Epoch, the system randomly selects a Leader node based on stake, responsible for disseminating received information to all other validating nodes in the network. All zk-proofs are verified by a decentralized network of validating nodes, ensuring the security and censorship resistance of the system, and generating signatures for the Leader node. Once a transaction is signed by the required number of nodes, it can be broadcasted on the Bitcoin network.

![UTXO binding: Detailed explanation of BTC smart contracts solutions RGB, RGB++ and Arch Network])https://img-cdn.gateio.im/webp-social/moments-0b0106c9ec7c79b2e266824525ff1721.webp(

Conclusion

In terms of Bitcoin programmability design, RGB, RGB++, and Arch Network each have their own features, but all continue the approach of binding UTXO. The one-time use authentication property of UTXO is more suitable for smart contracts to record state.

However, these solutions also have obvious disadvantages, namely poor user experience, confirmation delays consistent with Bitcoin, and low performance. They only extended functionality without improving performance, which is particularly evident in Arch and RGB. The design of RGB++ does provide a better user experience by introducing a high-performance UTXO chain, but it also introduces additional security assumptions.

As more developers join the Bitcoin community, we will see more scaling solutions, such as the op-cat upgrade proposal, which is currently being actively discussed. Solutions that align with Bitcoin's native properties are worth paying special attention to. The UTXO binding method is the most effective way to expand its programming capabilities without upgrading the Bitcoin network. As long as the user experience issues are well addressed, it will be a significant advancement for Bitcoin smart contracts.