Smart contracts are automated agreements that are executed once the conditions are met. The contract is concluded between the contract creator and the recipient. Automating the execution of the agreement, triggering the next action, self-executing workflows – all sorts of things can be done through smart contracts. Smart contracts for Bitcoin SV can automate tasks without any intermediary. Contracts known as Smart work on the if-then statement and are executed once the conditions are met.
Smart contracts are written by developers as code that exists on blockchain (distributed ledger). Developers use the Solidity programming language to develop contracts, commonly referred to as smart contracts.
What are Bitcoin SV Smart Contracts?
Building Web3 applications used to be limited to Ethereum and other emerging blockchains. The Bitcoin scripting language ensures powerful scripting. The Bitcoin SV Smart Contract is software code that runs across all nodes on the Bitcoin SV blockchain network. When smart contracts are stored on the blockchain, they stay there permanently and the code can never be changed. Bitcoin Ledger is responsible for storing and replicating the agreement, ensuring security and immutability are intact. Initially, Bitcoin was not designed with smart code functionality, just to provide decentralized currency.
How to Use Bitcoin SV Smart Contracts?
Bitcoin SV smart contracts can do the following things:
- Works as multi-signature accounts. Funds are only spent if a certain percentage of people agree.
- Facilitate the management of agreements between multiple parties.
- Performs the process of sending data and receiving data itself.
- Use of Other Contracts.
Types of Bitcoin SV Smart Contracts
A script is used to write smart contracts on the Bitcoin SV blockchain. The script is the language that enables the writing of smart contracts. Below are some of the common types of Bitcoin SV smart contracts.
Pay-to-Public Key Hash (P2PKH)
The P2PKH script is the most popular and widely used Bitcoin blockchain transaction. The locking script in the Bitcoin network works via private-public key pairs. The P2PKH script allows bitcoin to be sent to the address, so only the owner can issue the bitcoin with a private key. The P2PKH works as follows.
- First, the recipient generates a public/private key pair.
- Convert the public key to hash.
- Convert hash to address.
- The recipient then sends the address to the sender.
- The sender sends bitcoin to the address.
- The recipient can now access the fund using Bitcoin.
Multi-Signature Scripts
For transactions to take place, multi-signature scripts require signatures from more than one party. The biggest benefit of multi-signature scripts is that even if one party loses a private key, other parties have access to the private key.
| single key transactions | Multisig Transactions |
| A single key is required to complete the transaction | Multiple keys are required to execute transactions. |
| Losing a private key results in a single point of failure. | Even if a single key is lost, the hope of losing money is not lost. |
| Centralized point of control and authority. | Control and authority are in the hands of several parties. |
| Safety depends solely on the owner. | The money is retained even if the party loses keys. |
| The transaction speed is fast | Transaction speed is slow due to the multiple keys involved. |
Pay-to-Script Hash (P2SH)
Pay-To-Script Hash is a special type of address that allows you to create and output addresses based on the satisfaction of the sender-provided script. Unlike paying for the public key hash, the hash digest of the redeeming script (script to unlock bitcoin sent to the P2SH address) is paid for on-chain. P2SH allows transactions to be sent to script hash instead of public key addresses.
P2SH allows Bitcoin to be sent to addresses that are secured in a variety of ways. The recipient may need multiple people’s signatures or passwords or requirements that are unique.
time locked
The Timelocked Bitcoin SV Smart Contract is a smart contract that allows execution of smart contracts at a specific point in time. The issuance of bitcoin can be restricted up to a certain point in time. Additionally, this contract can be used to change spending requirements. For example, it may be necessary to obtain three signatures within a certain period of time in order to spend bitcoin. However, after the required period has expired, it may be necessary to obtain only one signature.
Bitcoin network limitations
The Bitcoin network has its own limitations, such as: B. Slow transaction speed. Bitcoin was originally created to process 7 transactions per second. But as the network gained popularity, fees and transactions also started to increase. The slow transaction speed and high fees caused delays in the development of the Bitcoin network.
Another major concern was privacy. Although bitcoin transactions are private, all transaction details are easily visible through purchase history.
Solutions to overcome limitations
Taproot update
A Taproot update was released in November 2021, enabling a new way of conducting Bitcoin transactions by improving the flexibility and privacy of smart contract processing. It allows for the aggregation of multiple signatures and transactions to speed up verification of transactions across the network. Taproot Upgrade Includes Three Bitcoin Improvement Proposals (BIPS)
- Schnorr Signatures ( BIP 340)
- Taproot (BIP 341)
- Tapscript (BIP 342)
Bitcoin SV smart contracts on additional layers
In addition to smart contacts running as regular bitcoin transactions, bitcoin can also be used to power transactions at additional levels. One such type is the Lightning Network.
lightning network
The second level of technology enables off-chain transactions. It is designed to use payment channels. Lightning payments are extremely fast as they are not recorded on the blockchain. The two-party multi-signature method allows parties to send and receive payments instantly with almost no fees. The Lightning Network creates a smart contract between two parties. The agreement rules are coded into the contract at contract creation and cannot be changed or broken.
Additional bitcoin layers
The main layers built on top of the blockchain are as follows:
side chains
Separate blockchains that run parallel to the main blockchain are called sidechains. They have their own rules, purposes and functions. Each sidechain has its independent blockchain network. There could be multiple side chains connected to the main chain.
roll up
The layered blockchain scaling solutions conduct transactions outside of the Layer 1 network. This data from transactions is then uploaded to the second blockchain layer. This would increase security as Layer 1 has sole responsibility for data security as the data resides on the base layer. In this way, rollups can help increase throughput and reduce costs since there is no interference in the primary tier.
State Channels
State channels allow parties to engage directly on the blockchain network. The transactions are carried out without considering primary chains. State Channels use smart contracts and do not depend on the Layer 1 blockchain for transaction verification. After the transaction part is completed, state channels ensure the storage of the resulting state on the primary layer.
Nested blockchain
In the nested blockchain, there are some secondary chains besides the main chain. The primary chain is responsible for assigning tasks while taking control of parameters. The work to perform various transactions falls to secondary chains.
layer 3
Also known as the application layer, it acts as a user interface to different blockchains that interact and communicate with each other.
Final Thoughts
Bitcoin has disrupted the financial world by showing how money can exist and function without the direct control of governments and banks. Through smart contracts for Bitcoin developers, you create new types of decentralized applications and use cases. Bitcoin SV as a smart contract platform provides a mechanism for contracts to be observable, auditable and enforceable.
The first happiness is a top web3, blockchain and Metaverse Development Company which has rich experience in developing secure smart contracts. We also offer Smart Contract Audit Services. In addition, we offer various top levels Blockchain dApp Development Services to help you get the most out of your business.
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