The Bitcoin blockchain is not known for its ability to enable intelligent contracts. In fact, most developers who create smart contracts use a different blockchain, such as Ethereum.
But the truth is that the Bitcoin protocol can be used to create intelligent contracts. Particl.io, the blockchain eCommerce platform, is doing just that by using Bitcoin-based intelligent contracts to manage funds in its unsecured trust: Mutually Assured Destruction (MAD), or Mutual Assured Destruction Trust.
For particl, Bitcoin offers the ideal combination of intelligent contract functionality, enough to make smart contracts easy to implement, but without the security and privacy risks of a more complex platform such as Ethereum.
Smart contracts
An intelligent contract is an agreement that can be enforced through a chain of blocks. Instead of relying on a legal framework to ensure that each party that enters into a contract complies with its terms, you can use blockchain to create a contract that is automatically applied, between two people, in a decentralized manner.
Ethereum has become the most popular block chain to create smart contracts. From the beginning, this differentiated Ethereum from Bitcoin, which was created primarily as a digital currency platform.
Smart contracts based on the Bitcoin code
As the Bitcoin protocol has evolved, it has gained support for smart contracts. Smart contract functionality is not as programmable and extensible in Bitcoin as it is in Ethereum. However, when using features added to Bitcoin through improvement proposals, some intelligent contracting functionality can be achieved through Bitcoin scripts.
For particl, the most important intelligent contract feature in Bitcoin is OP_CHECKLOCKTIMEVERIFY, which was introduced by Peter Todd as Improvement Proposal for Bitcoin (BIP) 65. The opcode allows writing scripts that prevent funds in a multi-signature wallet from being spent until a certain signature pattern is implemented or a certain amount of time passes.
Particl, intelligent contracts and the MAD trust
The MAD trust is a technique that effectively prevents fraud in a transaction without requiring the supervision of a third party. In an MAD contract, a buyer and a seller deposit the funds in the escrow deposit. The seller starts depositing an amount that he wants the buyer to equal to symbolize a virtual handshake.
This could be between 0 and 100 percent of the purchase price of the item. Then, the buyer deposits an amount equal to the amount of the handshake, plus the price of the item he is buying. The escrow funds are not given to anyone until both parties confirm that the transaction has been successfully completed. The technique prevents either party from cheating in a transaction.
Particl uses the BIP 65 operation code to enable MAD custody contracts by blocking the funds in a multi-signature wallet until all parties sign the transaction. With this approach, buyers and sellers in the e-commerce platform of particl can operate without worrying about fraud or the payment of unnecessary fees.
Nor do they have to sacrifice privacy, because no third party is involved in the transaction. In addition, and perhaps most significantly, since there are only basic command sequences involved, security concerns are minimal.
The particl approach to smart MAD contracts is possibly better than building smart contracts on a platform like Ethereum. While Ethereum offers more extensible support for smart contracts, that flexibility carries a greater risk of security and privacy threats. The more codes that are included in a smart contract, the greater the risk of introducing a vulnerability that could allow an intrusion.
Ethereum could be a solid foundation for writing very complex smart contracts, or where security and privacy are not priorities, but Bitcoin provides a simpler and more reliable scripting framework for private deposits that requires particl.
Source: Bitcoin Magazine