Original text: For Bitcoin DeFi to Become a Reality, There's Now an Alternative to Op_Cat

Author: Eli Ben-Sasson

Translation and proofreading: Starknet Chinese Community

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Highlights

• ColliderScript is a way to achieve DeFi on Bitcoin without the need to re-introduce the OP_CAT code

• ColliderScript provides a way to connect the worlds of verification and signature checking

• Allowing signatures to be verified in the "big world" and checked in the "small world"

Bitcoin is celebrating its 16th birthday, and its "wedding" moment is about to arrive.

Just as we begin to count down to the 16th anniversary of the Genesis Block of Bitcoin - which actually marks the birth of the entire crypto world - Bitcoin has broken through the $100,000 mark. The next major milestone will no longer be a price breakthrough, but a milestone in functionality.

This milestone will come when this digital gold, digital store of value, and the DeFi realm are combined. At that time, many applications that are currently impossible will emerge, but without sacrificing the principles and security of Bitcoin. Just like a (happy) marriage, Bitcoin will maintain its uniqueness while achieving more goals. At that time, the celebration will be even more grand than it is today.

Currently, true DeFi powered by Bitcoin is not achievable. Due to the lack of covenants (a concept I will discuss below), there is also no natural "carrier" for DeFi activities on Bitcoin, such as ZK-rollups or Bitcoin-native second-layer networks. At the same time, the liquidity held by Bitcoin is locked up. I expect this situation is likely to change within a year.

More importantly, the transformation I envision will be a fast track to solving some major current issues, such as privacy, scalability, and payments. Bitcoin can provide us with the privacy we need, meet the demand for scalability, and build a payment structure that allows us to use cryptocurrencies on a daily basis.

In the deep exploration of the Bitcoin community, there is a piece of code that can achieve some or all of these functions. If the OP_CAT code from the Satoshi era is reactivated, it will pave the way for achieving some or all of the above functions on Bitcoin.

In other words, what you can do is far more than just holding Bitcoin, but truly enjoying the full DeFi experience backed by Bitcoin. The company I lead, StarkWare, has announced that we will work on this, so that Starknet L2 can be protected by Ethereum (as it is now) as well as be secured by Bitcoin. Achieving a dual Rollup.

I liken OP_CAT to adding a button to this scientific calculator, greatly increasing its functionality. It won't turn the calculator into a tablet or a game console, nor will it change the security of this intentionally limited-functionality device, but it will provide more possibilities for those who know how to use the device cleverly.

But if our goal is to combine Bitcoin with DeFi, just like every classic romantic comedy, we need a backup plan. A few weeks ago, a very interesting alternative emerged and has generated great interest among those deeply involved in Bitcoin. This potential path is a way to achieve DeFi on Bitcoin without re-introducing the OP_CAT code.

This is a solution called ColliderScript, which can achieve the covenants needed on Bitcoin without OP_CAT. Currently, this solution is still theoretical and very costly. But in our field, theory often quickly turns into practice. Just like the huge cost of the first genome sequencing, although the initial cost was high, it eventually became feasible over time. Let me introduce you to the results of this technology and why it is a major advancement that we will still be discussing in the decades to come.

Covenants and ColliderScript

Covenants in Bitcoin are a mechanism for imposing restrictions on how Bitcoin will be used in the future. But don't be misled by the word "restriction" - this mechanism is actually to unleash various possibilities. Covenants can enable smarter transactions. For example, covenants can automatically return funds if certain security conditions are not met, or make tools like crowdfunding and DeFi more likely to be realized on Bitcoin.

Covenants can also prevent attackers from fully controlling your Bitcoin, even if they obtain your private key. The way to achieve this is by time-locking the funds in your wallet. Covenants can even help the network scale in various ways and better manage the existing set of rules.

Previously, it was widely believed that the only way to implement Bitcoin covenants was to introduce OP_CAT or similar code into the Bitcoin protocol. But recently, my colleague Avihu Levy went on parental leave, and like all great crypto OGs, he couldn't completely detach from work, so he started working on an idea he had been contemplating - a way to achieve covenants without modifying the protocol. Meanwhile, Ethan Heilman and Andrew Poelstra were each developing ColliderScript. When they learned of each other's work, they came together like the Avengers to collaborate. Victor Kolobov from Avihu's team also joined, and their collaborative work has recently been published under the title "ColliderScript: Achieving Covenants on Bitcoin through 160-byte Hash Collisions".

The biggest obstacle to implementing covenants is Bitcoin's script system. Covenants require the ability to access the full information of a transaction, but Bitcoin's script system separates the tasks of verification and signature checking into two independent layers or "worlds". There is no natural way to combine the information from these two "worlds" - they run independently, unable to directly link the signature verification in the "big world" with the data checking in the "small world". The "big world" is where signature verification takes place, providing a macro perspective to confirm the authenticity of the transaction. The "small world" is where the rules for using the funds are executed, focusing on the specific details of the transaction.

ColliderScript provides a way to connect these two worlds, allowing signatures to be verified in the "big world" and checked in the "small world". This is achieved through a set of elements that can exist simultaneously in both worlds. The principle of the ColliderScript solution is to find an element from this set that collides with the signature hash in both the "big world" and the "small world". This method has a very high probability of transmitting information to the "small world", confirming that it has successfully "bridged" with the correct signature, and then allowing the details of the signature to be checked.

By establishing this connection - causing a "collision" between the "big world" and the "small world" - covenants can be achieved.

Bitcoin does not need to reinvent the wheel to achieve revolutionary breakthroughs; it only needs to continuously optimize and improve on the existing foundation. Covenants will put Bitcoin's ideas into practice, and also further strengthen my long-held view that Bitcoin is an empowering tool that allows individuals and small communities to have greater control over their financial lives.