Blockstream developer: Why are Bitcoin smart contracts so reliable?

Smart contracts are a hot topic in 2016. Investors, banks and large financial institutions are exploring smart contract protocols such as ETH, aiming to develop decentralized innovative applications.

However, even the ETH network, which is valued at $930 million, has not been able to develop practical cases, let alone commercialize smart contracts. Due to the ETH network's excessive pursuit of flexibility, security issues have become its Achilles' heel, causing multiple internal vulnerabilities, transaction delays and other security issues.

Crypto networks like ETH, once flexibility and functionality are placed above security, serious security and technical vulnerabilities are bound to occur. In theory, a highly functional, flexible and scalable network should be able to support large-scale projects and a large user base, but in fact, if the necessary security measures are not taken, the entire network may be at risk of being attacked at any time.

Bitcoin Smart Contracts

Many researchers and experts have tried to build smart contract platforms using the Bitcoin network, and they have explored a large number of solutions and related Bitcoin technologies. One of the most feasible technologies is the Lightning Network. The Lightning Network was created based on the research on payment channels by former Bitcoin developer Mike Hearn and Blockstream co-founder Matt Corallo.

The innovative concept behind the Lightning Network is HTLC (Hashed Timelock Contract) to multi-party contracts, where the recipient is able to pre-determine the transaction amount or the transaction itself before receiving the transaction.

That is to say, just like the traditional contract stipulates that A promises to send a transaction to B at a specified time, HTLC can also enable Bitcoin transactions to execute similar agreements. Therefore, the Lightning Network is fully applicable to the smart contract platform, and users can determine the payment or receipt amount before providing cryptographic proof for the transaction.

In my opinion, the Lightning Network is the most ambitious smart contract project this ecosystem has offered so far. The efforts of Poon and Dryja have inspired other teams around the world to contribute to the birth of the Lightning Network.

More importantly, the Lightning Network can also support complex smart contract platforms and carry multiple transactions at the same time without delaying transaction verification time because only the last transaction will be broadcast on the blockchain.

For example, if 21 transactions need to be settled between Bob, Alice, and another third party, the last transaction will include all the previous transactions and package them into one for miners to verify.

Another innovative concept of the Lightning Network is the use of federated sidechains for smart contract settlement. Once this concept is successfully deployed, other networks will be able to settle transactions with the Bitcoin mainnet as the core.

As another trust mechanism option besides the main chain, the sidechain allows users to enjoy the technology without having to rely entirely on Bitcoin's strict consensus rules.

With so many innovative smart contract concepts in development and testing, most Bitcoin enthusiasts are convinced that 2017 is the year Bitcoin smart contracts will see enterprise adoption.