Smart Contracts Running on Bitcoin? Internet Computer Founder Explains How It’s Possible
September 19 2021 - 5:00AM
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Upon its launch, Internet Computer took the crypto market by storm.
It’s an ambitious project, supported by some major names in the
industry. Designed and created by the DFINITY Foundation, it aims
to give more power to the people over the Internet, and it could
potentially take it into a new stage powered by its platform. Now,
the Internet Computer has taken another step into the future. Its
community recently voted and approved the “Increased Canister
Storage” as Internet Computer continues to integrate more features
and upgrade its platform. Next, the community will use the power
provided by the Internet Computer governance model to vote on
integration with the Bitcoin blockchain. In practice, this will
allow Bitcoin to have smart contract functionality (or Canisters,
as they are called on Internet Computer) on the Internet Computer
network with low-cost transactions and fast finality. Thus, the
decentralized ecosystem on both networks could expand into an
unprecedented era. We sat down with Dominic Williams, the founder
and Chief Scientist of the DFINITY Foundation to talk about this
proposal, its implications for Bitcoin and Internet Computer, and
more. This is what he told us. Q: It has been around 4 months since
Internet Computer was deployed, how would you describe the current
state of the project and the role the community is playing? Dom:
Developers and entrepreneurs have recognized its potential. As a
result, the Internet Computer is experiencing ferocious growth as
measured by the number of canister smart contracts running, the
number of developers building, and the number of active users the
dapps being built have, and arguably it is the fastest growing
blockchain when looking carefully at these metrics. Moreover,
developers have proven that the Internet Computer can be used to
build things that cannot be built on any other blockchain today.
For example, one of the most popular dapps on the Internet Computer
is “Open Chat”, which already has several tens of thousands of
users even though it is still in alpha. This runs entirely from the
blockchain, which means that smart contracts are used to process
the chat messages, and smart contracts also securely serve the
interactive web content users interact with directly into browsers
– which only the Internet Computer blockchain is capable of doing
today. Therefore, not only has Web 3.0 become real, but the
purposes to which blockchain can be applied have greatly expanded.
Q: Internet Computer is a relatively new project in a relatively
new industry, why do you think people are drawn into it, what makes
the platform unique? Dom: I think more and more people are coming
to the realization that blockchain is the future internet and has
immense potential. For that reason, many, many developers,
including those who are early in their careers and trying to decide
which tech sector to dedicate their lives to, are magnetized to the
blockchain. The Internet Computer is one of the oldest original
crypto projects but was one of the last blockchains to launch
because of the huge amount of R&D work involved in rethinking
blockchain architecture from the ground up and developing the new
cryptography frameworks that power it. But now that the Internet
Computer is available, it offers capabilities completely unlike
those of other blockchains. It is the first blockchain to scale the
seamless environment it provides for smart contracts so that it can
host any number of smart contracts, and any volume of smart
contract computations, and smart contract data, it is the first
blockchain to run at web speed (it can finalize transactions in 2
seconds and can serve “query transactions” that don’t modify state
in milliseconds), it is the first blockchain to run smart contracts
with efficiency comparable to running software on traditional IT
systems, and it is the first blockchain that enables smart
contracts to securely serve interactive web content directly to
those using dapps (today, dapps on all other blockchains have to
host their websites on centralized infrastructures, such as Amazon
Web Services, which creates all kinds of security and other
issues). These capabilities mean the Internet Computer can even be
used to create decentralized versions of mass-market social media
services, which run entirely from the chain and can be blended with
next-generation DeFi services. If you want, it can even be used to
build secure enterprise systems, allowing organizations to migrate
away from traditional IT to the blockchain. It has the potential to
truly uncork the blockchain genie. Q: Can you tell us more about
the process that will allow Bitcoin to operate smart contracts
power by Internet Computer? And how it’ll be different from
synthesized versions of BTC already operating on Ethereum? Dom:
Today, the Bitcoin network hosts almost a trillion dollars of
value, in the form of divisible bitcoins, which play the role of
digital gold. However, the Bitcoin network does not currently host
“smart contract” software of the kind introduced by Ethereum six
and a half years after the launch of Bitcoin. Smart contracts are a
new kind of software that is unstoppable and tamperproof, which is
guaranteed to run on the blockchain exactly as written and remain
secure without the protection of a firewall, can process value in
the form of tokens and can even run autonomously without a human or
organization controlling them. They allow blockchains to be applied
as a new kind of general-purpose platform and have facilitated the
DeFi (decentralized finance) revolution that Ethereum pioneered. If
Bitcoin gained smart contracts, developers would become able to
build all manner of exciting new systems and services that process
bitcoins and run from the blockchain, creating immense new value
while also adding value to Bitcoin. The enormous financial value
carried by bitcoins has great utility, and so the current practice
is to transport bitcoins onto blockchains supporting smart
contracts such as Ethereum by “wrapping” them, which is
unfortunately very dangerous. It involves bitcoins being sent to an
organization running what is known as a “bridge”, which keeps them
in its custody and then issues “wrapped bitcoin” on the destination
blockchain, which can then be processed by smart contracts. The
drawback of this approach is that the bitcoins are passed into the
custody of the bridge operators, which must be trusted to correctly
redeem the wrapped bitcoins when required later. This is
antithetical to the blockchain mission, which aims to remove the
need for trust. The approach is consequently highly risky, as
demonstrated by the recent hack of the Poly Network bridge on 10
August 2021. This bridge moved bitcoins and other tokens between
the Ethereum, Polygon MATIC and Binance Chain networks, and when it
was compromised crypto worth six hundred million dollars was stolen
(it was later returned by the hacker). Enter the revolutionary
“chain key cryptography” that powers the Internet Computer network.
This will enable smart contracts hosted by the Internet Computer to
directly maintain, send and receive bitcoins, which actually reside
and immediately move on the real Bitcoin network, obviating the
need for dangerous bridges and token wrapping. This is possible
because the Internet Computer protocol can securely and seamlessly
generate the private key ECDSA signatures involved in bitcoin
transactions on behalf of smart contracts, using chain key
cryptography. Meanwhile, Internet Computer nodes will directly
communicate with Bitcoin network nodes, ensuring that transactions
and balance information is moved back and forth and is always
available. Effectively, the scheme will meld the two networks,
extending Bitcoin with arguably the world’s most powerful smart
contract capabilities. Q: Once the smart contract capabilities are
implemented, what are the potential use cases that will benefit
people using these Internet Computer smart contracts with Bitcoin?
Dom: The possibilities are endless. The Internet Computer scales,
and can run unbounded volumes of smart contract computation at web
speed. Its smart contracts are also the first to be able to
securely serve web content directly to end-users without
intermediaries, with support for the new Internet Identity
anonymizing blockchain authentication system allowing users to
sign-on to dapps (decentralized applications) using devices
including fingerprint sensors on laptops, and face ID
systems, as well as hardware keys and wallets such as YubiKey
and Ledger. This means that in the future, your Bitcoin wallet
might be securely served into your web browser and that you will be
able to quickly, securely and conveniently authenticate yourself
using your fingerprint sensor, before sending bitcoin to any
address you like via the user interface. What is more, the Internet
Computer is allowing social media services to be built that run
from the blockchain, which can then be blended with DeFi. In the
future, your Bitcoin wallet might very well be a blockchain chat
app, and you might send bitcoin with messages, or atomically
transact for an NFT after negotiations. For many, this will begin
to realize the vision of bitcoin being applied within internet
services that Satoshi originally described. Q: Can the same process
that will enable smart contracts on Internet Computer to be
compatible with Bitcoin be implemented into other networks? If so,
which could be the next cryptocurrency to be integrated and why?
Dom: It is possible to integrate the Internet Computer blockchain
with Bitcoin because of the new “chain key cryptography” framework
that powers its protocols. This enables it to create transactions
on behalf of smart contracts, such that they do not need to manage
private key materials themselves. Once Bitcoin has been integrated,
the same work will be leveraged to directly integrate the Internet
Computer with Ethereum. This integration will enable two-way
calling between smart contracts on the Internet Computer and
Ethereum, enabling, for example, Ethereum DeFi dapps to serve their
websites from blockchain rather than centralized cloud services
such as Amazon Web Services. Implementing a blockchain that
supports chain key cryptography requires a multi-year R&D
effort spearheaded by a strong team of specialist cryptographers.
For such reasons, it is unlikely that any other blockchain will be
able to pull off the same feat in the foreseeable future. Q: How do
you envision the future of the crypto industry, as one where an
“Ethereum Killer” has defeated its competition or one where there
are multiple blockchains operating to the benefit of their users?
Do you think it’s important for Bitcoin, Internet Computer, and
others to be interoperable? We believe in a blockchain trinity
consisting of Bitcoin, Ethereum and the Internet Computer. They all
clearly satisfy different niches and complement each other.
Although both Ethereum and the Internet Computer support smart
contracts, the capabilities provided by the Internet Computer
environment are vastly different and much broader. Arguably,
Ethereum might become the world’s DeFi settlement layer, and will
cede the “world computer” vision to the Internet Computer, which
was built specifically to realize that vision through many long
years of R&D that cannot easily be replicated.
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