Smarter Than You Thought - Smart Contracts on Bitcoin
Bitcoin is, without question, one of the greatest things that happened to the world of fintech. Not only did it bring in the awesomeness of blockchain technology but also introduced a new dimension of transactions by providing enhanced security and transparency.
As we all know, blockchain is an immutable, transparent and secure digital ledger that stores information. This property of the blockchain makes it an ideal candidate for effecting financial transactions governed by a set of self-executing rules called smart contracts.
While the Bitcoin has served as the de facto standard for cryptocurrencies when it comes to transactions, it is Ethereum that has taken an upper hand when it comes to smart contracts. In fact, while Bitcoin was created as a digital currency platform, Ethereum was created to support smart contracts.
However, Bitcoin cannot be completely ignored when it comes to smart contracts. There are ways in which Bitcoin can be used to create smart contracts that can manage funds in their trusted escrow. What makes the Bitcoin ideal for simple smart contracts are the attributes that made it great in the first place. Bitcoin smart contracts are easy to implement and do not have any compromise on security and privacy unlike its most obvious rival, Ethereum.
Companies like Particl have used Bitcoin to create smart contracts. The blockchain eCommerce platform uses this system to manage funds in their trustless escrow. A term that was earlier confined to nuclear attack policies has now moved into the world of blockchain - Mutually Assured Destruction. This escrow is commonly abbreviated as MAD escrow.
The MAD escrow effectively prevents fraud in a transaction without the requirement of a third-party intermediary. In the MAD contract, a buyer and seller can place funds into the escrow. The seller starts by depositing a small amount to symbolize a virtual handshake. The fund could be anywhere between 0 and 100% of the purchase price.
The buyer has to deposit the equivalent of the handshake amount in addition to the price of the item they are buying. The escrowed funds are not released until both the parties confirm that the transaction has been satisfactorily completed. This technique helps prevent instances of fraud where the parties look to maliciously profit in the transaction.
Another small yet important feature of the Bitcoin smart contract is the script that prevents funds in a multi-signature wallet from being spent until a certain signature pattern is implemented or until there is a given amount of time delay, so there are no challenges in the funds that are about to be spent.
This has enabled the buyers and sellers on Particl eCommerce platform to transact without worrying about fraud or paying unnecessary costs for intermediaries. Since there is no third party involved in the transaction, there is no compromise on privacy either.
It is generally accepted notion that the higher the number of lines of code, the greater the vulnerability! Since the Bitcoin smart contract does not involve a lot of scripting, the security concerns are quite minimal.
Blockchain App Factory brings you the utility of the Bitcoin beyond its classic image of a mere cryptocurrency. The Bitcoin experts in our team can create smart contracts on the Bitcoin for governing simpler transactions with utmost rigidity.
As we all know, blockchain is an immutable, transparent and secure digital ledger that stores information. This property of the blockchain makes it an ideal candidate for effecting financial transactions governed by a set of self-executing rules called smart contracts.
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| Smart contract on Bitcoin |
Introducing Smart Contracts
A smart contract contains a set of rules and conditions that the transacting parties need to agree to in order to effect a transaction. The smart contract is what elevates the utility-value of blockchain. This would mean that there is no need for a trusted third party or any other intermediaries to ensure the upkeeping of the trust. This also translates to lower cost, faster transaction times, and higher efficiency.While the Bitcoin has served as the de facto standard for cryptocurrencies when it comes to transactions, it is Ethereum that has taken an upper hand when it comes to smart contracts. In fact, while Bitcoin was created as a digital currency platform, Ethereum was created to support smart contracts.
However, Bitcoin cannot be completely ignored when it comes to smart contracts. There are ways in which Bitcoin can be used to create smart contracts that can manage funds in their trusted escrow. What makes the Bitcoin ideal for simple smart contracts are the attributes that made it great in the first place. Bitcoin smart contracts are easy to implement and do not have any compromise on security and privacy unlike its most obvious rival, Ethereum.
Companies like Particl have used Bitcoin to create smart contracts. The blockchain eCommerce platform uses this system to manage funds in their trustless escrow. A term that was earlier confined to nuclear attack policies has now moved into the world of blockchain - Mutually Assured Destruction. This escrow is commonly abbreviated as MAD escrow.
How Particl Capitalized on the Bitcoin Smart Contract?
The MAD escrow effectively prevents fraud in a transaction without the requirement of a third-party intermediary. In the MAD contract, a buyer and seller can place funds into the escrow. The seller starts by depositing a small amount to symbolize a virtual handshake. The fund could be anywhere between 0 and 100% of the purchase price.
The buyer has to deposit the equivalent of the handshake amount in addition to the price of the item they are buying. The escrowed funds are not released until both the parties confirm that the transaction has been satisfactorily completed. This technique helps prevent instances of fraud where the parties look to maliciously profit in the transaction.
Another small yet important feature of the Bitcoin smart contract is the script that prevents funds in a multi-signature wallet from being spent until a certain signature pattern is implemented or until there is a given amount of time delay, so there are no challenges in the funds that are about to be spent.
This has enabled the buyers and sellers on Particl eCommerce platform to transact without worrying about fraud or paying unnecessary costs for intermediaries. Since there is no third party involved in the transaction, there is no compromise on privacy either.
It is generally accepted notion that the higher the number of lines of code, the greater the vulnerability! Since the Bitcoin smart contract does not involve a lot of scripting, the security concerns are quite minimal.
The Advantages Over Ethereum
Without question, Ethereum presents a very strong foundation for writing complex smart contract where the functionality takes priority over security and privacy. However, the Bitcoin provides a simpler and relatively more reliable scripting framework for private escrows where privacy and security are of paramount importance.The Future of Bitcoin Smart Contracts
It is quite evident by now that Bitcoin gives better security and is more suited for financial transactions, and it goes in line with why the Bitcoin was inserted in the first place. There are a lot of Bitcoin-based blockchain projects but most of them are building cryptocurrencies. The capacity of the Bitcoin to function as a foundation for decentralized platforms hasn't been completely recognized.Blockchain App Factory brings you the utility of the Bitcoin beyond its classic image of a mere cryptocurrency. The Bitcoin experts in our team can create smart contracts on the Bitcoin for governing simpler transactions with utmost rigidity.
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