Dialogue with DFINITY Founder: What changes will providing smart contracts for Bitcoin bring to both?

Original Title: 《Dialogue with DFINITY Foundation Founder: Integrating with Bitcoin is Revolutionary》
Interviewee: Dominic Williams, Founder and Chief Scientist of DFINITY Foundation
Translation: Baize Research Institute

Since its launch, the "Internet Computer" has swept the cryptocurrency market. It is an ambitious project supported by some major companies in the industry. Developed and created by the DFINITY Foundation, it aims to empower people through the internet, allowing for the on-chain hosting of unlimited data and computation, and making it easy to build scalable Dapps, DeFi, websites, and more.

Now, DFINITY has taken a significant step into the future.

On September 17, a proposal titled "Direct Integration of the Internet Computer (DFINITY) with the Bitcoin Network" was approved by the DFINITY community, receiving a support rate of 96.55%.

Proposal Interpretation

The proposal aims to add smart contracts to Bitcoin through the application of "chain key cryptography," allowing applications to directly integrate with the Bitcoin network. Smart contracts on the Internet Computer (Dfinity) will be able to hold, send, and receive Bitcoin without the need for private keys.

Bitcoin is a decentralized cryptocurrency based on an open-source P2P protocol. Since its release as open-source software in 2009, its technology has been a revolutionary idea, serving as an alternative peer-to-peer payment system that allows its users to regain control over transactions without a trusted third party.

Bitcoin transactions are validated by a network of nodes. A public distributed ledger known as the "blockchain" is shared among all users and records information about each transaction. Node owners, known as miners, receive fees for each transaction in the form of Bitcoin. Due to some technical shortcomings of the Bitcoin blockchain, it currently plays the role of "digital gold." The main technical shortcomings can be attributed to three reasons:

Speed

Bitcoin typically takes about 10 minutes to complete a transaction. Most blockchain technologies suffer from being very slow. Ethereum, launched in 2015, uses a newer form of proof of work to speed things up, but it is still far from the speed required for a large number of online users.

Scalability

Since its launch, Bitcoin's scalability has been an issue within its community, as it does not scale well to serve as a global currency. This is due to the size limitations of Bitcoin itself, which restrict the number of transaction record blocks the network can handle within a certain timeframe. New blocks are generated approximately every 10 minutes, and their size is limited to 1 megabyte. Therefore, the Bitcoin network has never processed more than 8 transactions per second.

High Transaction Fees

Fees for Bitcoin and Ethereum are paid to miners to cover the computational costs of confirming secure transactions. The amount of the fee depends on the byte size of the transaction and supply and demand, as the capacity of these blockchains is limited.

The goals of the proposal are as follows:

• To provide powerful smart contract capabilities for Bitcoin transactions;

• To enable fast processing and low transaction costs for Bitcoin transactions.

Providing smart contracts for Bitcoin will add tremendous value, effectively enhancing the combined strength of the Bitcoin network as the world's "digital gold" reserve and DFINITY as a secure and efficient platform for executing smart contracts. Additionally, Bitcoin can be used to pay for any type of service on the Internet Computer, opening up endless application scenarios.

DFINITY's smart contracts can directly hold Bitcoin, with their balances captured on the real Bitcoin network. These Bitcoin smart contracts can run Turing-complete logic and determine when to transact Bitcoin with other entities (such as regular Bitcoin users). DFINITY's smart contracts can create Bitcoin transactions and relay them to the Bitcoin network. Direct integration means that not only can DFINITY's smart contracts accommodate Bitcoin, but it also means that intermediaries like "bridges" or "wrapped BTC" are not introduced in the design.

Dialogue with DFINITY Foundation Founder

A reporter from Newsbtc interviewed Dominic Williams, the founder and chief scientist of the DFINITY Foundation, discussing the proposal and its impact on both blockchain networks.

Q: DFINITY has been deployed for about 4 months now. How would you describe the current state of the project and the role of the community?

Dom: Developers and entrepreneurs have recognized its potential. Therefore, DFINITY is experiencing explosive growth, measured by the number of smart contracts running, the number of developers building, and the number of active users of DApps. It can be said that it is the fastest-growing blockchain when closely examining these metrics. Additionally, developers have proven that DFINITY can be used to build things that cannot be constructed on any other blockchain today. For example, one of the most popular DApps on DFINITY is "Open Chat," which, despite still being in the Alpha stage, already has tens of thousands of users. This runs entirely on the blockchain, meaning smart contracts are used to handle chat messages, and smart contracts can also securely serve interactive web content that users interact with directly through their browsers—something that only the DFINITY blockchain can do today. Thus, not only is Web 3.0 becoming a reality, but the application purposes of blockchain are also greatly expanding.

Q: DFINITY is a relatively new project in the cryptocurrency space. Why do you think people are attracted to it, and what makes the network unique?

Dom: I think more and more people are beginning to realize that blockchain is the future of the internet and has enormous potential. For this reason, many developers, including those early in their careers trying to decide which technology field to dedicate their lives to, are drawn to blockchain. DFINITY is one of the oldest original crypto projects, but it is one of the last blockchains to launch because a lot of R&D work was involved in rethinking blockchain architecture from the ground up and developing a new cryptographic framework to power it. But now that DFINITY is available, it offers capabilities that are completely different from other blockchains.

These capabilities mean that DFINITY can even be used to create decentralized versions of mass-market social media services that run entirely off-chain and can be mixed with next-generation DeFi services. If needed, it can even be used to build secure enterprise systems that allow organizations to migrate from traditional IT to blockchain. It has the potential to truly unveil the mysteries of blockchain.

Q: Can you tell us more about the process that allows Bitcoin to run smart contracts through DFINITY? How does it differ from the synthetic versions of BTC already running on Ethereum?

Dom: Today, the Bitcoin network carries nearly a trillion dollars in value in the form of divisible Bitcoin, playing the role of "digital gold." However, the Bitcoin network currently lacks the kind of "smart contract" functionality that Ethereum introduced six years later. Smart contracts are a new type of unstoppable and tamper-proof feature that guarantees execution exactly as written in code on the blockchain and remains secure without firewall protection, can handle value in the form of tokens, and can even run autonomously without the need for a person or organization to control them. They allow the blockchain to be applied as a new type of general-purpose platform and have facilitated the DeFi revolution pioneered by Ethereum.

If Bitcoin gains smart contracts, the immense financial value carried by Bitcoin will have significant utility. Currently, the existing practice is to transfer Bitcoin to blockchains that support smart contracts like Ethereum through "wrapping," which is unfortunately very risky. It involves sending Bitcoin to an organization that runs a so-called "bridge," which holds them and then issues "wrapped Bitcoin" on the target blockchain that can be processed through smart contracts. The downside of this method is that Bitcoin is passed to the custody of the "bridge" operator, and one must trust the "bridge" operator to correctly redeem the wrapped Bitcoin when needed later. This is contrary to the blockchain's mission to eliminate the need for trust. Therefore, this method is very risky.

What the DFINITY network offers is revolutionary "chain key cryptography." This will allow smart contracts hosted by DFINITY to directly maintain, send, and receive Bitcoin, meaning these Bitcoins will actually reside on the real Bitcoin network and can be moved immediately, eliminating the need for dangerous "bridges" and "wrapping." This is possible because the DFINITY protocol can securely and seamlessly generate the private key ECDSA signatures involved in Bitcoin transactions representing smart contracts using "chain key cryptography." At the same time, DFINITY nodes will communicate directly with Bitcoin network nodes, ensuring the authenticity of transaction and balance information.

In fact, this proposal will integrate the two networks.

Q: Once the smart contract functionality is implemented, what are the potential use cases for these DFINITY smart contracts using Bitcoin?

Dom: The possibilities are endless. DFINITY is scalable and can run an unlimited amount of smart contract computations. Its smart contracts are also the first to securely provide network content directly to end users without intermediaries, supporting new internet identity anonymous blockchain authentication systems that allow users to log into DApps (decentralized applications) using devices like fingerprint sensors, facial recognition systems, and hardware keys and wallets like YubiKey and Ledger.

This means that in the future, your Bitcoin wallet could be securely sent to your web browser, and you would be able to quickly, securely, and conveniently authenticate your identity using a fingerprint sensor before sending Bitcoin to any address you like through a user interface. More importantly, DFINITY allows for the construction of social media services running from the blockchain, which can then be mixed with DeFi.

In the future, your Bitcoin wallet is likely to be a blockchain chat application, and you might send Bitcoin through messages or conduct NFT transactions after chatting. For many, this will begin to realize the vision of Bitcoin being applied to the internet services originally described by Satoshi Nakamoto.

Q: Can the same process that makes smart contracts on DFINITY compatible with Bitcoin be implemented on other networks? If so, which cryptocurrency might be next to integrate, and why?

Dom: Due to the new "chain key cryptography" framework supporting its protocol, DFINITY blockchain can be integrated with Bitcoin. This allows it to create transactions on behalf of smart contracts so that they do not need to manage private keys themselves. Once Bitcoin is integrated, the same work will be used to directly integrate DFINITY with Ethereum. This integration will enable bidirectional calls between smart contracts on DFINITY and Ethereum, for example, allowing Ethereum's DeFi to serve its website directly from the blockchain (rather than centralized cloud service companies like Amazon Web Services).

Implementing a blockchain that supports "chain key cryptography" requires years of R&D work led by a strong team of professional cryptographers. For these reasons, it is unlikely that any other blockchain will achieve the same feat in the foreseeable future.

Q: How do you envision the future of the crypto industry, or an industry where multiple blockchains operate for the benefit of users? Do you think interoperability between Bitcoin, DFINITY, and others is important?

We believe in a blockchain trinity composed of Bitcoin, Ethereum, and DFINITY. They clearly meet different market segments and complement each other. While both Ethereum and DFINITY support smart contracts, the capabilities offered by the DFINITY environment are vastly different and broader. It can be said that Ethereum may become the settlement layer for DeFi in the world, leaving the vision of the "world computer" to DFINITY, which has undergone years of R&D that cannot be easily replicated to realize this vision.