SegWit Creator Introduces New Language For Bitcoin Smart Contracts (#GotBitcoin?)
Bitcoin Core developer Pieter Wuille has introduced a new Bitcoin (BTC) smart contract programming language called Miniscript. SegWit Creator Introduces New Language For Bitcoin Smart Contracts (#GotBitcoin?)
Wuille, a creator of major Bitcoin network upgrade SegWit, announced the Miniscript project website on the mailing list message for Bitcoin developers on Aug. 19.
As noted in the statement, Miniscript was developed and implemented by Wuille, Andrew Poelstra and Sanket Kanjalkar at Canadian blockchain tech firm Blockstream Research. Wuille claimed that the project took the developers about a year, and it has now reached the stage where it needs to get more attention.
Miniscript is a language for writing a subset of Bitcoin scripts in a structured way, which enables analysis, composition, generic signing and others, as Wuille describes it in short. Meanwhile, Bitcoin script is a basic programming language that makes smart contracts on the Bitcoin network possible by enabling users to set specific conditions for a certain transaction to be completed.
According to Wuille, the adoption of Miniscript could reduce some of the barriers between pieces of software used in smart contracts, and also provide a multisig ecosystem that functions in a more effective way than simple script language. He explained on Twitter:
“Imagine a company wants to protect its cold storage funds using a 2-of-3 multisig policy with 3 executives. One of the executives however has a nice 2FA/multisig/timelock based setup on his own. Why can’t that entire setup be one of the multisig “participants”? A lot of work is focused on extensions to the functionality of the blockchain itself to support more complex application, but I feel we’re forgetting that using these features in an accessible, composable, analyzable way is basically impossible today.”
Script Analysis Made Easier
While Miniscript is basically a reformulation of Bitcoin script and remains the same script language, it allows wallets and other software to construct and analyze scripts more effectively, Wuille explained on Reddit.
In the post, Wuille provided an example of how the same notation would look in basic Bitcoin script in comparison with one in Miniscript language.
Miniscript is now available in implementations for C ++ and Rust, Wuille wrote, adding that work on the project is ongoing. The developer clarified that Miniscript is designed for Bitcoin as it exists to date and does not require any consensus changes.
This Startup’s Upgrade Code Can Be Used by Any Bitcoin-Based Blockchain
A small blockchain company out of Arizona has built open-source software that it says any bitcoin-based blockchain could use to improve its functionality.
Nexus announced Monday what it called its seventh “activation” – a protocol upgrade that brings smart-contract functionality to the Nexus blockchain, which launched as a fork of the original bitcoin protocol in 2014. Deployed today, the activation goes into full effect Nov. 11.
If all goes well, other blockchains can feel free to follow suit by borrowing the code.
“Part of the intention was to use the original bitcoin code from the 2014 era to upgrade that into our framework,” Nexus founder Colin Cantrell told CoinDesk. “Any blockchain that uses the legacy UTXO can actually upgrade smart contracts over their live blockchain without having to do a chain reset or anything like that.”
UTXO stands for “unspent transaction output” but it’s also become a shorthand for blockchains based on bitcoin. The basic idea is that such a blockchain verifies there is money to be spent before it spends it, which is part of preventing the double-spend problem.
“All the bitcoin forks could essentially upgrade and potentially utilize it,” Cantrell said of his company’s latest release.
Even if they didn’t want to add smart-contract functionality, Cantrell argued that the Nexus codebase offers other improvements for UTXO chains – like much faster syncing for nodes and lower disk space usage, for example.
What Is Nexus?
Nexus launched in 2014 and it has self-funded so far by directing a portion of the newly minted coins to the team building the network.
With a market cap at $19.4 million as of this writing and a token price that has steadily sat at about $0.30 since last November, the project has had to generate enough value for its emitted tokens to support the team’s work. (The price briefly rose as high as $13.00 in early 2018.)
Nexus had no pre-mine, no venture capital and no initial coin offering.
Cantrell said it started as a basic bitcoin fork, but Nexus has had several activations since it went live. Now it uses two different proof-of-work chains and a proof-of-stake system. And with the new Tritium upgrade, it also has smart-contract functionality with competitive transaction times.
“One of the biggest things we’ve seen is that scalability is not a feature. It’s kind of a requirement,” Cantrell said. The startup claims it can manage anywhere from 2,000 to 25,000 transactions per second. (One of the highest-throughput blockchains, XRP, consistently hits 1,500 transactions per second.)
Nexus uses a variety of strategies to achieve higher throughput, including sharding and proof-of-stake, but it also uses something familiar in basic computing but less discussed in the blockchain industry.
“Our smart contracts run on a register-based virtual machine, and that’s one way we’ve achieved extra efficiency,” Cantrell said. That is, register-based as opposed to stack-based. Most existing blockchains are stack-based, which is an older style of computing.
“The architecture is a lot more difficult to implement, but the efficiency is much higher if you implement it correctly,” Cantrell said.
Developers will find it much easier to work with since much of its functionality is accessible through an API, he said.
And regular people can manage access through a more traditional login that gives them control over a public-private key pair held for them online. “We believe blockchain is still a bit complicated for people to use,” Cantrell said.
However, rather than simply storing them in the cloud, the company encrypts the keys in what he calls “mathematical hyperspace.”
“There’s no central authority users are logging into,” he said.
Who Will Use It?
Nexus has primarily focused on technology and hasn’t done a lot of business development yet.
However, at a tech event in Arizona, Apple co-founder Steve Wozniak announced a partnership with Nexus on a new education initiative that will be built on the Nexus blockchain.
Cantrell said Nexus is ready to make a stronger case to potential business partners now because it understands what business customers need.
A blockchain is not a good platform for full-on computing, he said, but it is a good way to verify things – such as identity, authenticity, ownership and logical soundness.
These are the sorts of use cases that Nexus has been built around. “The internet can have a secure and immutable data layer,” Cantrell said.
New Digital Dispute Rules Aim To Keep Crypto Disagreements Out Of Court
New digital dispute rules could keep smart contract disagreements out of the courts with the help of an independent arbitration tribunal.
A British government-sanctioned task force has proposed a dispute resolution framework that would keep cryptocurrency and smart contract disagreements out of the courts.
A 14-page report published by LawTechUK’s UK Jurisdiction Taskforce puts forward new “Digital Dispute Resolution Rules” that aim to provide a standardized means of dealing with smart contract disputes.
Under the remit of the new rules, crypto-based disputes could be resolved without any major intervention by the courts. The laws would allow for the appointment of an independent tribunal to adjudicate on matters of dispute, and any decision reached by the tribunal would be legally binding.
The rules also allow for disputes to be raised without disclosing one’s identity to anyone but the tribunal, retaining some of the anonymity afforded by blockchain technology.
The document also lays out the directions and procedures one must take to raise a dispute. Notably, if someone wishes to take advantage of the dispute resolution service, they need only state so in whichever smart contract transaction they are making.
“These rules may be incorporated into a contract, digital asset or digital asset system by including the text (which may be in electronic or encoded form) ‘Any dispute shall be resolved in accordance with UKJT Digital Dispute Resolution Rules,’” the document states.
If a decision by the tribunal needs to be enforced, it can be pursued via courts established on the law of England and Wales. Sir Geoffrey Vos, master of the rolls (the head of civil justice in England and Wales), said he foresaw the rules being implemented in a range of digital transactions in the future.
“I am confident that the Digital Dispute Resolution Rules will be incorporated into many types of digital transaction going forward. The UK Jurisdiction Taskforce will keep a close watch on how the Digital Dispute Resolution Rules are used, and will aim to consider whether experience suggests they need revision within the coming year,” said Vos, in the foreword to the report.
Smart Contracts And The Law: Tech Developments Challenge Legal Community
Regulators will be challenged to respond to and address smart contracts, as they represent a cross section of law and technology.
Smart contracts are an important element of the blockchain revolution, although they predate blockchain. According to most sources, it was Nick Szabo who coined the term “smart contract” in the 1990s. The mechanism of a vending machine has since been frequently given as an example of a basic smart contract based on if-then logic. The payment into a vending machine triggers an irrevocable automated action from when money is retained to when an item is supplied.
The emergence of blockchain technology enabled the implementation of such if-then logic on decentralized networks to facilitate autonomous self-executing, self-performing smart contracts, also called computerized scripts, smart code, computerized protocols or decentralized business logic. Ever since they gained popularity, it has been debated and questioned whether they are at all smart or contracts.
The Basics Of Smart Contracts
Setting this debate aside for the moment, smart contracts offer many benefits. One of them is efficiency brought mainly by automation, their streamlined formation, unambiguous interpretation and efficient performance. Efficiency gains bring forth cost savings, achieved through the removal of intermediary layers and the reduction of ambiguities and opportunistic behavior.
Transparency of smart contracts provides auditability and enhances trust. Technology-guaranteed performance facilitates transacting not only between parties that do not know each other but also between parties that would be reluctant to transact with each other without guaranteed performance.
Ex-ante guarantee of performance through automation and self-execution of smart contracts also helps to avoid institutional enforcement and costly contract breaches. Smart contracts can enable more efficient, cheaper business processes, supply chain management, corporate governance and much more. We are only starting to explore their potential use.
However, it has to be said that smart contracts also require a certain degree of technical literacy to code, implement and understand them, and outside of the blockchain community, such skills remain relatively low.
Smart contracts are also not free from technical challenges and vulnerabilities throughout all stages of their lifecycle, from creation through to deployment, execution and completion. There are also ex-ante costs of smart contract implementation and costs of switching to smart contract networks, which should not outweigh the benefits to realize any efficiency gains.
Technology And Law
Smart contracts represent the intersection of technology and law, and therefore challenge practitioners, scholars and legislators — many legal issues have been debated. Smart contracts have been called out as neither smart nor a contract.
First, there is neither a commonly agreed-upon definition nor a unified, structured and systematic classification of smart contracts. There is no common agreement or understanding about the relationship between smart contracts and traditional legal contracts. Some scholars question the ability to create valid, binding legal contracts through a smart contract.
Discussions are ongoing in regard to applicable legal frameworks and how to reconcile the immutability of blockchain records with contractual mistakes or contractual deficiencies. Similar concerns have been raised about amending smart contracts’ terms recorded on an immutable ledger.
Also governing law and applicable jurisdiction are particularly relevant issues for borderless, decentralized blockchain networks on which smart contracts are being deployed. Consumer protection and duty of information issues are also being raised.
Increasingly, there are also considerable concerns related to Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) requirements, as well as privacy and confidentiality issues. Immutability and automated, unstoppable execution are also potential legal pitfalls for smart contract use.
This analysis is made more difficult since there are different types and models of smart contracts, depending on their legal relevance (if any), context and technical properties. They vary from simple, straightforward and standardized payment instructions, to sophisticated instruments capable of the autonomous performance of a complicated sequence of actions.
The emergence of blockchain-based smart contracts also brought a new dimension to the notion of cyberspace self-regulation. Moreover, discussions about “code is law” and “Lex Cryptographia” ensued.
However, when it comes to legislators and regulators, they have been largely silent on smart contracts. Despite vigorous scholarly debate about the legal status, recognition and enforceability of smart contracts, their normative legitimacy and legal implications, legislators do not seem to be alarmed nor are they rushing into any prohibitive action. Even though there is some legislative activity in selected jurisdictions, thus far only a handful of countries have formulated a regulatory response and enacted legislation, which has usually been modest.
Smart Contracts vs. United States
For example, the majority of the legislative initiatives on smart contracts in the United States are relatively narrow and govern only a select number of issues mostly limited to defining smart contracts, recognition of their electronic form and signatures, and sometimes their admissibility as evidence. This includes states like Arizona, Tennessee, North Dakota, Nevada, Wyoming and Illinois.
Some critics have claimed that such legislative initiatives are premature and incomplete, and amount to no more than a promotion of a particular jurisdiction. This creates the risk of regulatory fragmentation among the U.S. states and piecemeal smart contract legislation, potentially complicating the harmonization at the federal level in the future.
The U.S. federal regulatory and supervisory agencies, such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), addressed smart contracts through their investigations, statements and guidance, which clarify some legal implications of smart contract use in the United States.
The CFTC issued a primer on smart contracts in which it claims that a smart contract could be a binding legal contract, depending on the facts and circumstances, and could be subject to a variety of existing legal frameworks.
The CFTC also highlighted several risks stemming from smart contract use including operational risks, technical risks, cybersecurity risks, risks of fraud and manipulation, and risks arising out of governance protocols.
Similar to the CFTC, the SEC applies existing legal frameworks in its enforcement actions related to blockchain and smart contracts. As a sign of increasing regulatory scrutiny, the SEC recently announced procurement for smart contract analysis tools to analyze and detail code within blockchains and other distributed ledgers, in support of its efforts to monitor risk, improve compliance and inform SEC policy concerning digital assets.
Smart Contracts Vs. The World
In other parts of the world, countries like Belarus, Italy and Russia have addressed smart contracts to a limited extent. The United Kingdom Jurisdiction Taskforce issued an important legal statement, concluding that smart contracts are capable of forming valid, binding and enforceable contracts between parties, emphasizing the adaptability and flexibility of common law that is capable of catering to technological advancements such as smart contracts.
The European Union has also expressed consumer protection concerns related to the use of smart contracts, but so far there has been no regulatory action taken at the EU level.
The existing legislative initiatives seem to align when it comes to the recognition of smart contracts within existing legal frameworks; however, they differ on defining smart contracts. It is just a matter of time before issues related to smart contracts reach the courts, allowing the judiciary to address legal questions, particularly in common law jurisdictions.
In the meantime, the proliferation of diverging definitions and potentially legal treatment of smart contracts may give rise to legal uncertainties and regulatory arbitrage. Legislators should therefore closely follow developments in smart contracts and step in only when necessary to provide legal certainty, mitigate risks and protect vulnerable contracting parties.
Such a measured and risk-based regulatory approach would support innovation, harness opportunities and integrate smart contracts innovation within existing legal systems. Adequate regulatory guidance could also help to remove legal uncertainties and uplift market confidence for the industry, investors and consumers.
The market size of global smart contracts is rapidly growing. It is predicted to gain a compound annual market growth rate of 17.4% in the forecast period of 2020 to 2025, and is expected to reach $208.3 million by 2025. Smart contracts are increasingly being deployed across a broad range of sectors, including the financial sector, public sector, supply chain management, and the automobile, real estate, insurance and healthcare industries.
They are also the backbone of a growing decentralized finance (DeFi) space. Regulators will be increasingly challenged to respond to and address smart contracts, but legislative initiatives so far indicate that there are no major obstacles for smart contract use; it does not seem that any substantial legal reforms are necessary to embrace them.
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