Smart Contracts: What Are They, How Do They Work And What Do They Contribute? (Part III)

Smart Contracts: What Are They, How Do They Work And What Do They Contribute? (Part III)

Current Situation of Smart Contracts in Bitcoin

Let’s not forget that when we talk about Bitcoin we are talking about a new ecosystem, dynamic and in constant process of growth, but also, as we have indicated before, about smart contracts.

Little by little, new implementations of smart contracts are appearing in Bitcoin but, currently, it is already being applied in some functionalities that are likely to sound familiar to you, such as multi-signature wallets, in which two or more parties must approve the execution of a transaction before the funds are released.

Smart Contracts What Are They How Do They Work And What Do They Contribute (Part III)
Smart Contracts in Bitcoin.

Along with multi-signature addresses, double deposits are one of the functions that facilitate the proper functioning of smart contracts of this type.

It was introduced by BitHalo and is innovative because it eliminates the need for a third party to act as arbitrator.

It basically consists of the parties, say for example a buyer and a seller, carrying out BOTH a deposit transaction linked to a smart contract.

The contract schedule has a set time before it expires. If the people involved in the agreement do not resolve it in that period of time, the funds from the deposits will be burned, that is, they will be sent to an address where nobody knows the private key, forcing the parties to make every effort in the search for solutions.

Smart Contracts What Are They How Do They Work And What Do They Contribute (Part III)
Blockchain.

Very soon, in a new post we will introduce you to the main multi-signature wallets and explain how they work in as much detail as possible.

Although Bitcoin has a programming language to add logic, there are those who think that sometimes it falls short.

This is why solutions have been created that take smart contracts to new horizons, with full Turing languages.

Before introducing some of the platforms and projects that also make use of smart contracts with their own alternative currency, it is important to highlight the role of the Counterparty project and one of the newcomers, Rootstock, who want to bring the new generation smart contracts to Bitcoin.

What is Counterparty?

Smart Contracts What Are They How Do They Work And What Do They Contribute (Part III)
Blockchain.

Counterparty was born in 2014. It is an open source platform in which peer-to-peer applications can be developed, initially oriented to the financial sector, on the Bitcoin blockchain.

Currently the protocol implements and supports the creation of assets, the issuance of bonds of those assets, payment of dividends, the trading of assets using a decentralized market, binary betting, and contracts-for-difference (CFD).

Its open-source protocol, in addition to enabling the creation and trading of digital assets, also enables the writing of smart contracts, enabling the transformation of many real-world stocks into code that works automatically without the need for intermediaries and is resilient to failure.

Counterparty also has a token called XCP. This is used to offer some possibilities that are not technically possible at the moment using BTC (bitcoins).

Although the interest in more powerful smart contracts has been announced since the beginning of the project, it has recently been confirmed that finally the Ethereum EVM will be introduced inside Counterparty, which will allow the execution of smart contracts identical to those of Ethereum but on the Bitcoin network, allowing an enormous diversity of applications such as Decentralized Autonomous Organizations (DAOs), identity systems, consensus-based voting systems, among others.

As of this post date, the Ethereal Virtual Machine (EVM) is operating only on Counterparty’s test network. How is it possible that they have been able to reuse the free software EVM? Counterparty uses the same smart contract programming language, called Solidity.

According to Trevor Altpeter, director of the Counterparty Foundation, EVM will now be able to do everything Ethereum does, only in the Bitcoin blockchain.

To be able to execute the contracts is used the currency of Counterparty, the XCP.

What is RootStock?

Smart Contracts What Are They How Do They Work And What Do They Contribute (Part III)
Blockchain.

Rootstock, known as Bitcoin’s Ethereum, is another platform trying to bring full Turing smart contracts to Bitcoin in order to take advantage of Bitcoin’s network effect and security without having to create anything from scratch (it has been published that the platform will also be compatible with Ethereum).

It is an open source platform for creating smart contracts that will reward miners who actively participate.

Its main objective is to add value and functionality to the Bitcoin ecosystem by activating secure smart contracts on the network, adding options for instant payments and greater scalability.

To do this, RootStock uses sidechain chains, connected to the Bitcoin chain, and its token (Roots), which will only be exchanged for bitcoins.

Although relatively new, Rootstock has already secured $1 million in its latest round of funding from the Digital Currency Group (DCG).

Nick Szabo himself said on his twitter: “the best of Bitcoin (currency and liquidity of the system) + the best of Ethereum (ecosystem of smart contract programming)”.

This post continues at Smart Contracts: What Are They, How Do They Work And What Do They Contribute? (Part IV)

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