ICP to Boost Bitcoin's DeFi Capabilities via Advanced Threshold Cryptography
Summary:
The Internet Computer Protocol (ICP) plans to use advanced threshold cryptography to enhance decentralized finance and smart contract functionality on Bitcoin's base layer. ICP's integration of threshold-Schnorr signatures will empower its smart contracts to directly transact on the Bitcoin blockchain. The full implementation of threshold-Schnorr is expected by mid-2024. This initiative aims to expand the potential of decentralized applications that can leverage Bitcoin’s security and liquidity without dependence on centralized bridges.
The Internet Computer Protocol (ICP) has unveiled its plan to harness advanced threshold cryptography to bring decentralized finance (DeFi) and smart contract functionality straight to Bitcoin’s inherent layer. Aisling Connolly, a senior research scientist at Dfinity, explained in an interview at Paris Blockchain Week that by using threshold-Schnorr signatures, ICP’s smart contracts could directly get addresses and authorize transactions on the Bitcoin Blockchain. Named after Claus Schnorr, a mathematician, Schnorr signatures work as a covert communication between two entities, authenticating one party's approval without exposing their confidential code.
ICP's implementation will enable its smart contracts to use Schnorr signatures to establish Bitcoin Runes, log Ordinals in a decentralized approach, and facilitate BRC-20 token operations straight on the Bitcoin base layer, and sign taproot transactions as well as re-inscribe Ordinals. Full integration of threshold-Schnorr is expected to be completed by the middle of 2024. The core integration of threshold-Schnorr-BIP340 by ICP makes it possible for smart contracts to generate addresses and authorize Bitcoin transactions natively.
Connolly elaborated that Schnorr facilitates additional functionalities, like bundling transactions, and opens up new applications evolving on Bitcoin. She noted that Schnorr signatures are akin to ECDSA signatures, currently used by Bitcoin for ownership management. However, Schnorr signatures are "easier, speedier, and more secure."
The intention is to utilize Schnorr signatures combined with ICP's protocol-level integration with the Bitcoin network to expand the potential of decentralized applications (DApps) and services that can leverage Bitcoin’s security and liquidity without dependency on centralized bridges. Connolly identified a number of operational use cases already in development.
Connolly also addressed the possible reaction of the broader Bitcoin community to this integration. She said that initial discussions with Bitcoin supporters indicate a positive perception of infrastructure expanding Bitcoin's utility.
ICP currently boasts more than 300 developers who are working on creating Bitcoin-enabled DeFi, NFT, gaming, and social media DApps. In 2022, ICP introduced Bitcoin integration. Through employing chain key cryptography, the need to use bridges for cross-chain operations was eliminated, and now ICP's smart contracts can directly manage Bitcoin operations.
Published At
4/16/2024 4:00:00 PM
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