The technical development of Bitcoin had an exciting year, full of projects, debates and improvements that undoubtedly position this technology at the top of the most secure, audited and studied projects today. One of the main characteristics of Bitcoin is that its development is open source. That means that the programming principles of your software are subject to public reviews, where a community of engineers, programmers and mathematicians constantly propose and reflect on changes that are subsequently integrated into the program. We will analyze some of the main proposals to improve Bitcoin, presented in 2023, that could change the way we use the world’s main electronic currency payment method.
During 2023, two major updates to Bitcoin Core, the protocol’s main client or software, were released. The first of these arrived in May with the version of Bitcoin Core 25.0.0., where highlighted the decrease in Minimum transaction size to 65 bytes. That is, since then Bitcoin allows smaller transactions, which strengthens the system against potential vulnerabilities and opens a field of possibilities. However, this opened a path for new BRC-20 tokens, which are commonly used small transactions and currently fill the network mempool (or temporary memory for waiting transactions).
As for the next iteration of this client, version Bitcoin Core 26.0.0, released in December, highlights the integration of support experimental for the second generation of the Bitcoin P2P protocol. This enhancement was introduced with BIP-324 and uses an encoding method called ElligatorSwift, developed by Pieter Wuille, Marko Falke and Jonas Schnelli. This update will protect nodes from attacks and censorship through “opportunistic” encryption of messages. It also reduces the bandwidth required by connections of the network.
The V2 transport protocol is not active by default at this time, but is supported by other peers that support and enable the feature. Version 1 of the Bitcoin transport protocol or P2P is still supported.
At the beginning of the year, Anthony Towns, a Bitcoin Core developer, announced Bitcoin Inquisition, a fork of the Bitcoin Core software designed to test soft forks and other major protocol changes on the signet testnet. At the end of the year, it contained support for several covenant proposals (or agreements to establish conditions in transactions and their compliance) such as SIGHASH_ANYPREVOUT, OP_CHECKTEMPLATEVERIFY and ephemeral anchors basic (a proposal that allows a transaction to be transmitted even if it pays no commission, as long as a second transaction pays enough for the whole set). These improvements are currently promoted by a working group that has the objective of changing the methodology to obtain consensus among developers, as reported by CriptoNoticias.
If the necessary consensus is achieved, Bitcoin Inquisition could be the gateway to including other integration requests in the Bitcoin code (pull request) open that would support OP_CAT and OP_VAULT, two types of covenants, and the restriction against 64-byte transactions (transactions that would be below the minimum limit).
Simplify Bitcoin Computing with OP_CAT
Covenants are proposals that have the potential to make Bitcoin more flexible and have the potential to make its technology more widespread practical way. We will make a special mention for one of these scripts (of more than a dozen proposals). OP_CAT, a script whose old version was removed as part of the response to a value overflow incident, which allowed the creation of more than 184 billion bitcoin, is a new operations code that allows two values to be concatenated on the stack. In this way it is possible to create a message (such as a serialized transaction) by adding individual parts of the message (for example, the fields of a transaction). Initializing the stack with the message already divided into parts simplifies writing scripts that perform tests on those parts.
Another tool that would be easier to implement with OP_CAT is the “tree signature” (tree signature), which enables the possibility of make multi-signature scripts. For example, a transaction less than 1 KB in size could support tree signatures with a thousand public keys.
OP_CAT is enough to create vaults (vault or OP_VAULT), a specialized type of covenant proposed in 2016, and which would require a soft fork for integration. Vaults allow a user to block an attacker who has compromised the user’s secret key, from stealing funds at that exit. These are just some of the possible scenarios where OP_CAT would be relevant in simplifying the writing and execution of code.
BitVM, a virtual machine for Bitcoin
The BitVM protocol can be defined as a Turing complete system. That is, it is a universal virtual machine capable of mathematically emulating any program or computer system. In principle, BitVM is a bridge between Bitcoin and any external program that requires running on the main chain, as reported by CriptoNoticias. “Any computable function can be verified in Bitcoin,” explains its creator in the project’s white paper. In other words, this protocol verifies the validity of requests from computer programs that want to be compatible with Bitcoin.
BitVM would in principle allow for the execution of covenants, smart contracts, would provide a means to create quorums for side chains, would have properties similar to Liquid or the EVM (Ethereum Virtual Machine), making it possible to link rollups and create new altcoin markets. . It would also allow the creation of congestion control systems or CoinJoin aggregators, a protocol that is capable of “mixing” bitcoins, increasing the privacy of transactions and preventing them from being traceable.
BitVM’s biggest obstacle today is probably the computational expense it requires from programs that want to be compatible with Bitcoin. Although BitVM seems like the gateway for a large number of DeFi platforms and markets, it is estimated that the economic costs could be too high (Bitcoin’s current programming makes it difficult to execute BitVM code) . Except for simpler tools, such as oracles (DLC). However, some developers consider that a soft fork, for example OP_CAT, would reduce this computational demand. It would be something like changing the lock in programming terms. This aspect will be crucial, since it depends on the consensus of the developers whether or not to execute a fork of this style.
ZeroSync, the zero-knowledge proof in Bitcoin
ZeroSync is a project to bring zero knowledge proofs or zero knowledge (zk) proof to the Bitcoin environment, which is located in its initial phase of development and offers a tool kit for programmers, as reported by Criptonoticias. Zk proof is a cryptographic procedure that would allow the Bitcoin blockchain to be validated on a device without having to download it via complete and without trusting a third party. This type of testing makes it possible to verify the validity of information without revealing the information itself and is used, for example, by Ethereum rollups.
For full nodes, ZeroSync will represent a method to synchronize all information immediately, since it requires few computational resources. It may also be especially useful so that small devices such as cell phones or wallet applications can verify transactions without resorting to other nodes on the network (the tools that normally do this procedure are known as thin clients and They have existed since the dawn of Bitcoin, however they do not offer as many advantages as zero-knowledge proof).
Another usage example relates to verifying transactions that use batching, a method that combines multiple transactions into a single one. If this technique is used frequently, nodes must perform multiple verifications of each transaction involved in the batching, which requires a large amount of computation (requires verify a good part of Bitcoin’s history repeatedly), so a cell phone does not have the capacity to do so. The test uses a version of utreexo< /span>, known as a dynamic transaction accumulator used to verify UTXOs, with a hash function optimized for Bitcoin.
In its initial stage, ZeroSync already gives anyone with a local device the ability to know and validate the latest status of the block chain via a browser or an iPhone. The tool provides information about the block heads, which have an identification hash, information about the validity of the contained transactions, the proof of work and the level of difficulty of the network.
Mini script Enhancements
Mini script is a programming language introduced by Pieter Wuielle in 2019 that makes it easy to write scripts or instructions to implement spending conditions, which support signature combinations, hash locking, and temporary locks. Specifically, Miniscript automatically parses an instruction. Additionally, because Miniscript tells the wallet what to do, developers don’t have to write new code when they need to switch from one script to another. This makes wallets more dynamic because you can compose or replace the spending policies of those wallets with an easy-to-write language.
Bitcoin P2P Protocol Version 2
The update to Bitcoin’s P2P protocol, through which the network’s consensus is executed, has been under discussion and improvement since 2019. Its most complete version, ready for integration, appeared in July. In December it gained support in Bitcoin Core 26.0, although experimentally (not by default). This update does not require a fork of the protocol.
The Bitcoin P2P Transport Protocol V2 (BIP-324), as it is also known, proposes the use of “opportunistic encryption unauthenticated” of Bitcoin node connections. Its goal is to make it difficult to trace connections (even by passive spying) and potential censorship by governments or other entities with enough power to control the Internet servers of P2P connections belonging to Bitcoin users. It also increases the cost of operations for potential attackers who try to manipulate these connections (who must also expose their state with each attempt), for example through a man-in-the-middle attack (or eclipse attack) on Bitcoin miners.
RGB 0.10, smart contracts and tokens for Bitcoin
RGB is a protocol capable of creating, exchanging and managing tokens through smart contracts, defined and validated outside the Bitcoin blockchain, for example through the Lightning network.
Among the properties of RGB (which means “really good for Bitcoin”), it stands out that changes in the state of the smart contract that manages the token (for example, transfers) are associated with blockchain transactions in a unique way. It uses no additional block space, compared to a typical transaction, and can keep all information about each contract (including its existence) completely private. This is because their validation paradigm is completely client-side (i.e., the software running the protocol).
RGB is a zero-knowledge protocol that uses distributed computing and has the potential to create token markets with minimal impact on Bitcoin activity. Since September, RGB version 0.10 is available for development in different applications, because wallet designers can use BDK (Bitcoin Development Kit), a toolkit and a code library, which makes it easy to integrate RGB into applications. The protocol is available in three wallets: MyCitadel (desktop), Iris (Android) and BitMask (web).
Taproot Asset, una Ethereum Killer
Taproot Assets v0.3, a protocol that is partially based on RGB, is now available in its alpha version (experimentally active on-chain) to be integrated into applications and wallets. Taproot Assets allows the issuance, transfer and management of assets in Bitcoin, using Taproot.
The developers have different libraries and repositories to implement the protocol. These include the Universe repository, with which wallets can launch and download the state of the Taproot Asset; Polar, a tool for creating application prototypes; and litd v0.12, the Lightning Labs tool suite that includes the LND (Lightning Network Daemon) client for operating nodes.
By the way, another improvement related to Taproot Asset has to do with the development of “simple Taproot channels”, integrated in version LND 0.17. Simple Taproot channels offer the benefit of reducing transaction weight and improving privacy when channels are closed cooperatively. Basically, it allows Lightning network commitment and financing transactions to use P2TR with support for scriptless multi-signature, similar to MuSig2, when both parties cooperate. /span>
At the end of October, Olaoluwa Osuntokun, CTO of Lightning Labs, presented seven proposals to be included as BIP (or proposals to improve Bitcoin) related to Taproot Asset, as reported by CriptoNoticias.