What are contracts?
The contract is used in private property law as a contract that restricts the use of the object, for example, prohibits the building to expand or change the color of the facade.
As Bitcoin is privately owned, the term pact seems perfectly appropriate to refer to its transaction restrictions. You own the property, but you may have restrictions on what you can do with it.
In particular, the proposals in the Bitcoin Pact restrict how coins can be spent and where they can be transferred after purchase. These restrictions can be compared to the restrictions that banks can impose on specific merchants suspected of illegal activities.
The agreements may be useful for renewing Bitcoin; however, as they are difficult to implement and give rise to controversy over cryptocurrency and censorship, their inclusion in Bitcoin has not been seriously considered for a long time.
Can Bitcoin be improved?
There is no doubt that Bitcoin can be improved and border crossings, including agreements, represent the proposed changes to the Bitcoin Consensus.
The agreements are included in the Bitcoin Improvement Proposals (BIPs), a process of upgrading and enhancing Bitcoin to change and promote issues such as scalability, security and usability.
Agreements allow the Bitcoin scripting language to prevent an authorized user from spending on specific other scripts. They describe how to improve Bitcoin in smart contracts, which is included in the code, which is triggered when certain conditions are met.
These Bitcoin agreements can prevent users from stealing money in the event of a hack and can also help expand the network. Many applications have been offered for the agreements, from increasing the volume of Bitcoin’s transactions to congestion control, trust-reducing loans and more. These uses are described in the controversial document BIP119, presented by Jeremy Rubin as a soft fork and discussed by the community.
This Bitcoin upgrade proposal introduces a change to the Bitcoin code to use a new opcode. The opcode is OP_CHECKTEMPLATEVERIFY (CTV-style contract) and allows a limited number of valuable uses without significant risk.
CTV could potentially help Bitcoin scale through congestion-controlled transactions. When the transaction traffic is very high, the fees increase exponentially. Using this CTV, large payment processors can add all their payments to a single transaction for verification purposes, saving block space and resulting in faster and cheaper execution.
How do Bitcoin contracts work?
An agreement can be defined as a linguistic primitive (the smallest and simplest “processing unit” available to a programmer) that extends Bitcoin’s scripting language, allowing transactions to restrict scripts to be redeemed.
In a typical Bitcoin transaction, your Bitcoin is protected by a lock script, the conditions of which should be met if you want to spend coins. An example of a lockout condition might be a denial of charges without a signature, proving that you have a private key that matches the public key; or histories similar to contracts that show that coins cannot be spent until there are a certain number of blocks.
If in a “regular” Bitcoin script we only require certain conditions to be met in order to open a certain request (for example, to sign a transaction with a private key), then in the case of a pact, we will go a step further by limiting what you receive. make it with a coin or where you can spend a coin.
The Bitcoin Pact is often defined as a “mechanism for enforcing the conditions for the transfer of control of coins in the future” and contains a set of conditions for the output of a transaction (UTXO) that determines the relevance of the transaction. coins can be spent.
For example, a wallet can contract Bitcoin by adding some related addresses to the white list. If this wallet forwards a Bitcoin transaction to another wallet, that wallet can only send the same Bitcoin to the addresses on that whitelist.
Advantages of Bitcoin agreements
Improving Bitcoin’s security is one of the most important advances developers are constantly looking for, and contracts can be a great help in improving it.
In addition to improved scalability, contracts also help ensure security, especially in the event of a $ 5 wrench attack. Taking steps to protect your Bitcoin property from making it harder for people to steal is a great guide.
Another good security method offered by Pacts would be to restrict your UTXO from being sent to multiple pigs, for example, after one year. Contracts can also address the challenges of secure key management, and implementing secure vaults can help address one of the biggest security challenges for cryptocurrencies. Vaults increase end-user security by reducing coin theft.
The user uses a mechanism that prevents an attacker from getting full